Schmidheiny v. Weber

Citation:' Schmidheiny v. Weber, 146 F. Supp. 2d 701 (E.D. Pa. 2001) (motion to dismiss for lack of standing), 164 F. Supp. 2d 484 (E.D. Pa. 2001) (motion to dismiss counterclaim s), 2002 U.S. Dist LEXIS 11852 (E.D. Pa. Feb. 14, 2002) (cross motions for summary judgment), rev'd and remanded, 319 F.3d 581(3d Cir. 2003).

Factual Background
Plaintiff Schmidheiny, a Swiss national, sued defendant, a resident of Pennsylvania, under the ACPA. Defendant registered the domain name "schmidheiny.com" and offered it for sale to the plaintiff. Defendant filed a motion to dismiss, asserting that plaintiff lacked standing to bring a claim under the ACPA because "Congress never intended for the ACPA to extend to foreign nationals with no ties to the United States."

Trial Court Proceedings
Rejecting defendant's arguments, the court found that plaintiff's complaint adequately alleged an injury "within the zone of interests protected by the [ ACPA ]," namely, "the misappropriation for profit of a person's name as a domain name." The court pointed out that it was the injury, not the party, that gave rise to Article III standing.

The court also found no extraterritoriality impediment because the alleged ACPA violation occurred within the United States. Noting that the ACPA is codified with the Lanham Act, defendant also argued that Congress did not intend the ACPA to apply beyond the traditional reach of the Lanham Act. To the contrary, the court found protection under the ACPA to be broader than that of other sections of the Lanham Act, because the ACPA applied to "names of 'another living person,' irrespective of whether the name has become a protectable mark."

On July 31, 2001, the court granted plaintiff's motion to dismiss defendant's abuse-of-process and unfair-competition counterclaims. Defendant's abuse-of-process counterclaim alleged that plaintiff, knowing that defendant could not afford to defend the litigation, filed the action with the improper motive of using it as leverage to force defendant to relinquish the domain name. The court noted, however, that bad motive was not enough to constitute abuse of process. Rather, there must be an allegation that the process was being used for a purpose other than that for which it was designed. And the court held that plaintiff used the process (summons and complaint) in this case for its intended purpose of initiating litigation.

Defendant's unfair-competition counterclaim contended that plaintiff attempted to reverse hijack the domain name. The court, however, held that defendant's reverse domain name hijacking theory would render impossible the enforcement of the Congressional intent in enacting the portion of the ACPA granting individuals the right to seek relief when another registers a domain name consisting of their name and attempts to profit from its sale. Defendant's reverse domain name hijacking state-law claim would create an absolute obstacle to the execution of this statutory cause of action and was therefore preempted by federal law.

On February 14, 2002, the court granted summary judgment in favor of defendant, holding that the registration of "schmidheiny.com" was not covered by the ACPA because the name was first registered several months prior to November 29, 1999, the effective date of the statute. Plaintiff argued that the domain name was subject to the ACPA because the name was re-registered or renewed several times after the effective date of the ACPA. The court, however, held that the term "registration" did not cover "re-registration" for several reasons. Congress made a clear legislative choice that the ACPA was not to be applied retroactively unless it expressly said so. For example, Congress made 15 U.S.C. §1125(d) expressly applicable to all domain names registered "before, on or after the date of the enactment of this Act." No such exception exists in Section 1129. Moreover, the plain meaning of "registration" as used by Congress imparted to the court no meaning other than the initial registration. "[I]f Congress chose to treat re-registrations as registrations, it could have used more appropriate words to impart the definition." In view of this ruling, the court held that the defendant's remaining counterclaim, seeking a declaration that the ACPA is unconstitutional, was "not ripe for review."

Appellate Court Proceedings
On appeal, the Third Circuit reversed. In particular, the appeals court disagreed with the district court's analysis that the "creation date" of a domain-name registration is always the critical date for determining whether a registration is subject to Section 1129. The appellate court believed that the "plain meaning" of the word "registration" was not limited to "creation registration," noting that the words "initial" and "creation" appeared nowhere in Section 1129. Rather, the statute applies to "[a]ny person who registers a domain name. . . ." The district court's reasoning that "if Congress chose to treat re-registrations as registrations, it could have used words appropriate to impart that definition" was not a sufficient reason for the lower court to read the word "initial" into the statute.

Turning to the facts of this case, the court noted that before the ACPA was enacted, the registrant for the domain name was "Weber Net" and the domain-name registrar was NSI. However, in June 2000, after the ACPA was enacted, a new registrant, "Famology.com," entered into a new registration agreement with a new registrar to secure the domain name for a new one-year term. The Third Circuit held that "the word 'registration' includes a new contract at a different registrar and to a different registrant. In this case, with respect to Famology.com &mdash; that occurs after the effective date of the [ACPA ]." If the district court's analysis was adopted, "the domain names of living persons [could] be sold and purchased without the living persons' consent, ad infinitum, so long as the name was first registered before the effective date of the Act." The court did not believe that this interpretation or construction of the ACPA by the district court was the correct one. The Third Circuit accordingly reversed the lower court's decision and remanded the case for further proceedings consistent with this decision.

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