Halo Management v. Interland

Citation: Halo Management, LLC v. Interland, Inc., 2004 U.S. Dist. LEXIS 15563 (N.D. Cal. Aug. 10, 2004).

Factual Background
Plaintiff, an Internet service provider (ISP), owned the federally registered mark HALO. Defendant, also an ISP, owned the domain names “bluehalo.com” and “interland.com,” often directing users from the “bluehalo.com” name to its “interland.com” corporate home page. Defendant also prominently used “blueHALO” as a trademark throughout its marketing materials. In June 2002, several years after plaintiff filed its trademark application for HALO, defendant attempted to federally register the marks “blueHALO Architecture” and “blueHALO & Design” for Internet-related services, but the PTO rejected both applications as being confusingly similar to plaintiff’s previously registered mark HALO.

Plaintiff sent a demand letter in early 2003 requesting that the defendant alter its mark, but defendant refused. In July 2002, about a year before objecting to defendant’s use of “blueHALO,” plaintiff entered into a license agreement granting Planet Halo, Inc. the “worldwide use and registration” of the HALO mark.

Regarding quality control, the license agreement required Planet Halo to “employ reasonable commercial efforts to maintain the positive business value of the HALO mark.” But the agreement did not give plaintiff any contractual right to inspect or supervise Planet Halo’s “commercial efforts” or use of the HALO mark.

Trial Court Proceedings
Plaintiff sued defendant for infringement and false designation of origin. After the court denied plaintiff’s motion for a preliminary injunction, defendant moved for summary judgment.

The court granted defendant’s motion, finding that plaintiff had abandoned its rights to the HALO mark based on its failure to maintain quality control. The lack of any contractual right to inspect or supervise Planet Halo’s use of the licensed mark, coupled with the absence of any provision permitting plaintiff to terminate the license if Planet Halo did not meet any purported quality obligations, rendered the license a “naked” one.

Although the lack of an express contractual right to inspect and supervise was not determinative, the court noted that plaintiff in actuality “relinquished &mdash; and otherwise failed to maintain &mdash; adequate quality control.” The relationship between plaintiff and Planet Halo was acrimonious. Planet Halo entered into the license agreement solely to resolve plaintiff’s charge of infringement. Given this adversarial relationship, the court noted that plaintiff should have been “more precise and rigorous” with its quality-control terms in the agreement.

There was nothing in the record to show that plaintiff was even “remotely interested” in quality control or that plaintiff was familiar with Planet Halo’s internal quality-control efforts. Plaintiff’s “quality control efforts consist[ed] of little more than a short series of curt, pro forma requests to review unspecified products and materials.” These two e-mails occurred more than six months after execution of the license agreement and right before plaintiff filed this suit.

It thus appeared to the court to be a litigation tactic by which plaintiff “wished to cure the abandonment of its mark through a series of tardy, dilatory, and facile quality control gestures.” According to the court, however, these belated efforts neither changed the character of the naked license nor restored plaintiff’s “forfeited” trademark rights.

This page uses content from Finnegan’s Internet Trademark Case Summaries. This entry is available under the Creative Commons Attribution-Share Alike License 3.0 (Unported) (CC-BY-SA)..