Progress in protecting gripe site owners against silly trademark claims

by Paul Alan Levy

A recent decision from a federal judge in Detroit holds out hope of providing better protection for the owners of Internet gripe sites who face groundless lawsuits intended to make them pay a high price for standing up for their free speech.

Lawrence White created a simple, anonymous web site at careeragentsnetwork.biz  to warn prospective small business owners to check carefully before investing their savings in a the “health care employee recruiting business” opportunity offered by a company called “Career Agents Network.”  Career Agents Network sued in the U.S. District Court for the Eastern District of Michigan, claiming that the domain name infringed its trademark and constituted cybersquatting.  Even though Sixth Circuit precedent foreclosed both causes of action, plaintiff moved ex parte for a temporary restraining order and obtained relief compelling the identification of White, and freezing the domain name, by concealing the controlling authorities from the Court.  The defendant got summary judgment (represented by private counsel)  by citing the controlling cases; but it cost the defendant nearly $20,000 to defend his rights.

I had turned down the case when White first came to me, because I myself had already won the infringement issue in Michigan in Taubman v. WebFeats (for a step-by-step account of that litigation, written by a defendant who managed to keep his sense of humor even while being the target of litigation abuse, be sure to check out www.taubmansucks.com/).  It seemed a waste of Public Citizen’s limited resources to take a case in which the issues were already clearly established – and in the right way.  But we were concerned that if a consumer complainer has to spend tens of thousands of dollars to protect his rights even when the law is clearly established, there is a large disincentive to speaking out in the first place.  Just by having to spend $20,000, White lost. And by the same token trademark holders are unduly encouraged to file SLAPP suits against speech if they can be confident that their critics face the sort of Hobson’s choice that confronted White (ht Greg Beck for suggesting that I call this a Morton's Fork).So, we entered the case solely to seek attorney fees for White.  Some circuits (like the Eleventh) seem to require close to bad faith on the plaintiff’s part before a successful non-commercial griper can be awarded attorney fees for successful defense of a trademark case; other courts, like the Ninth and Seventh Circuits, allow attorney fees in appropriate cases simply because a trademark case is so groundless as to be oppressive.  The Sixth Circuit has a more mixed standard that considers both the degree of meritlessness and whether the plaintiff has engaged in litigation conduct that can be considered oppressive.  Until we succeed in getting the Federal anti-SLAPP bill adopted, we need to work to improve the courts’ approach to attorney fee awards when meritless IP cases are brought to suppress speech.

Judge Robert Cleland agreed that White should be awarded his fees, and his opinion provides hopeful signs of a possible evolution of the Sixth Circuit standard.   The judge expressed his amazement – and perhaps admiration – for White’s having rejected the financially sensible advice of the first lawyer he consulted after learning that he had been sued; he was advised to give in, and even to pay some damages, given what the litigation was going to cost him.  Judge Cleland adopted the analysis of a Judge Posner opinion, holding that, as in the copyright context, trademark defendants who do not stand to recover damages need the prospect of attorney fees as a financial incentive, counterbalancing the financial incentive that the prospect of a damages award gives IP plaintiffs, to stand up for their rights to make truthful use of trademarked words to communicate with the public.  He also considered the need to deter the misuse of trademark law to suppress free speech (one of plaintiff’s principals was careless enough to explain the lawsuit to her other customers as being needed, not to protect against confusion, but to punish criticism which, she said, might hurt her customers as well as her own company).   The court also took note of the fact that it had been misled into granting preliminary relief through the filing of an ex parte motion that omitted controlling authority.  The court concluded: 

An objective inquiry into the suit’s foundation supports granting attorney fees to Defendant, while a subjective inquiry into Plaintiff’s conduct during the litigation only marginally supports the same conclusion. Considerations of deterrence tip the balance in favor of awarding fees.

This suggestion that “oppressiveness” is a factor to be balanced with the objective merits of the case, with consideration to deterrence as well, is perhaps the most encouraging aspect of the opinion.