Sunlight Saunas v. Sundance Sauna

Citation: Sunlight Saunas, Inc. v. Sundance Sauna, Inc., 427 F. Supp. 2d 1032, (D. Kan. 2006) (cross-motions for summary judgment); 442 F. Supp. 2d 1160 (D. Kan. 2006) (defendants' motion for judgment as a matter of law).

Factual Background
Plaintiff sold personal saunas under the mark SUNLIGHT SAUNAS. Defendants, competitors of plaintiff, registered and used the domain name "sunlightsaunas-exposed.com" to allegedly "expose" the difference between plaintiff's claims about its saunas and what defendants saw as the "truth" about plaintiff's saunas. The website for a short time included a link to websites selling competitive saunas. Defendants set up an e-mail account using the name "sunlightsaunas@yahoo.com," and used this e-mail address to send e-mails to plaintiffs' competitors. Purporting to come from plaintiff, these e-mails provided a link to the "sunlightsaunas-exposed.com" website and suggested that the competitors "check out" the site. The e-mails also provided a link to defendants' website.

Trial Court Proceedings
Plaintiff sued for trademark infringement, dilution, false advertising, unfair competition, and cybersquatting, among other claims. The court denied defendants' motion for summary judgment on plaintiff's Lanham Act claims. As an initial matter, the court rejected defendants' assertion that their website qualified as protected speech under the First Amendment. Viewing the evidence in the light most favorable to plaintiff, the court held that defendants' intended their website "to have broad dissemination, and to divert potential customers of plaintiff."

The court also denied defendants' motion as to the trademark infringement claims, finding that a reasonable jury could find that defendants intended to infringe plaintiff's mark and that "consumers were likely to be confused as to the sponsorship of the website and e-mail account."

The court also denied defendant's motion for summary judgment on the cybersquatting claim. The court held, as a matter of law, that the term "exposed" did not remove the confusing similarity that accompanied the use of someone else's mark because that term "does not send the same unequivocal negative message as 'sucks'" and "may not immediately alert an Internet user that he or she is entering a 'gripe site.'"

Defendants were not entitled to summary judgment on the bad-faith element of cybersquatting. The court applied the statutory bad-faith factors and held that a jury could find bad faith because (1) defendants' domain name did not consist of its own mark, trade name, or legal name, (2) defendants chose the domain name to disparage plaintiff and to divert users from plaintiff's website, (3) defendants registered the domain name under a fictitious name, (4) and plaintiff's mark was distinctive.

After a jury trial, the jury found defendants liable for $2,500 actual damages and $150,000 punitive damages for defamation under Kansas law; $1.00 actual damages for false advertising and $1.00 actual damages for false description under Section 43(a) of the Lanham Act; and not liable for cybersquatting under ACPA. In this decision, the court denied defendants' motion for judgment as a matter of law on plaintiff's claims.

On the finding of false designation of origin under the Lanham Act, defendants argued that plaintiff offered no evidence that its mark was distinctive, and that it did not prove a likelihood of confusion. The court, however, upheld the jury's finding that SUNLIGHT SAUNAS was an "arbitrary or suggestive mark when applied to infrared saunas." Further, the likelihood of confusion on the most important factors was "strong," as plaintiff provided "compelling evidence" that defendants used an identical mark, with malicious intent to harm, and in the same market and through similar means (i.e., trade shows and Internet advertising). Regarding false advertising, the court could not "find that evidence on this issue points but one way and is susceptible to no reasonable inferences supporting [plaintiff]" and upheld the jury's finding.

Lastly, the court upheld defendants' liability for punitive damages on the defamation claim, despite plaintiff's failure to specify substantial actual damages. In a subsequent ruling, the court reduced the punitive damages to $50,000, pending plaintiff's acceptance, but denied defendants motion for a new trial, citing the sufficiency of the above evidence to support the jury's findings.

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