Hotmail v. Van$ Money Pie

Citation: Hotmail Corp. v. Van$ Money Pie, Inc., 1998 WL 388389 (N.D. Cal. 1998).

Factual Background
Plaintiff, Hotmail Corporation, is the provider of online e-mail services. Each piece of e-mail originating from the Hotmail server automatically displays a header depicting Hotmail’s domain name “hotmail.com” and a footer depicting a signature which reads:


 * “Get Your Private, Free Email at http://www.hotmail.com”.

In addition, the plaintiff developed the “Hotmail” mark (logo) to be used in association with its online services. The logo is used as a means of identifying and distinguishing Hotmail’s online service from those of others. The Hotmail logo appears along with the header and footer in every e-mail sent through the plaintiff’s services.

As a prerequisite to using the services, each subscriber must agree to a Service Agreement. The Service Agreement specifically prohibits subscribers from using Hotmail’s services to send unsolicited commercial bulk e-mail, also known as spam. Hotmail had invested substantial amounts of time and money to disassociate itself from spam and protect its users throughout the world from receiving spam associated in any way with the Hotmail service.

In the Fall of 1997, Hotmail learned that the defendants were sending spam e-mails (including pornography, bulk software and get-rich-quick schemes) to thousands of Hotmail users. The defendants sent the spam e-mails using Hotmail return addresses, Hotmail domain name and the Hotmail logo despite the fact that the messages did not originate from Hotmail accounts. Though the e-mails did not originate from the plaintiff’s server, the defendants did set up several Hotmail accounts for the specific purpose of facilitating their spamming operation. Such mailboxes were used to collect responses to defendants’ spam emails.

Trial Court Proceedings
After learning the extent of the defendants’ actions, Hotmail sought a preliminary injunction against all defendants to prevent them from using the Hotmail e-mail service. Hotmail alleged that the defendants were involved in infringing Hotmail’s trade name and service mark (false designation of origin), diluting the trade and service mark, engaging in unfair competition and breaching the Service Agreement.

At trial, the court determined that Hotmail was entitled to a preliminary injunction on the grounds that they were likely to succeed on the merits on all claims alleged. In regards to Hotmail’s false designation of origin and unfair competition claims, the court concluded that the defendant’s use of Hotmail’s logo was likely to cause customer confusion or mistake as to the origin, sponsorship or approval of the spam e-mails sent by the defendants. Additionally, the logo used on the defendants e-mail]] was identical to Hotmail’s logo. Since the marketing channels used by both the plaintiff and defendants were identical, there was likely to be a great deal of interference in the plaintiffs business by the defendants’ actions. Therefore, enjoining the defendants on the grounds of unfair competition and false designation of origin was proper.

Additionally, the court found that Hotmail was likely to succeed on the merits on the dilution of trade and service mark and breach of Hotmail’s Service Agreement claims. In reaching this decision, the court found that the distinctive nature of the plaintiff’s logo, coupled with the extensive national and international marketing of the logo, were enough to establish considerable consumer recognition. Therefore, the improper and fraudulent use by the defendants in connection with Hotmail’s logo threatened to dilute the distinctiveness of the trademark and Hotmail’s business reputation as a whole.

Further, the court determined that the defendant’s actions of setting up mailboxes for the sole purpose of collecting responses from the spam they sent was in direct violation of Hotmail’s Terms of Service. The court reasoned that if the defendants were not enjoined they would continue to create such accounts in violation of the Terms. For the aforementioned reasons, the court entered a preliminary injunction against all named defendants.