Interstate Net Bank v. Netb@nk

Citation: Interstate Net Bank v. Netbank, Inc., 221 F.Supp.2d 513 (D.N.J. 2002) (granting plaintiff’s motion for summary judgment that NETBANK is generic for banking services); 348 F. Supp. 2d 340 (D.N.J. 2004) (granting plaintiff’s motion for summary judgment to cancel defendant’s registration).

Factual Background
Defendant, an online bank, owned an incontestable trademark registration for the mark NETBANK covering “electronic payment services featuring a system of electronic money coupons that are exchanged by means of an online computer service.” Plaintiff, another online bank, received a cease-and-desist letter from defendant regarding its use of NETBANK, and filed suit seeking a declaratory judgment that NETBANK was generic for online banking services.

Defendant counterclaimed for trademark infringement, dilution, and violations of the ACPA. Regarding the issue of genericness for banking services, the court initially held that the presumption of validity flowing from defendant’s registration did not apply here because the registration covered electronic bill-payment services, not online banking services.

The court also rejected defendant’s argument that online banking should be covered under the “natural expansion” doctrine, because defendant was not the original registrant and it had failed to demonstrate that the buying public would believe that internet banking services came from the same source as electronic bill-paying services.

The court then went on to find the term NETBANK generic for online banking services based on dictionary definitions of the terms “net” and “bank” and on widespread use of the term “netbank” in publications to generically refer to internet banks. The absence of a dictionary definition for the composite term “netbank” was not determinative. And defendant’s survey was not relevant because it tested genericness of NETBANK for online bill-paying services, not online banking services. But the court declined to cancel defendant’s registration because it covered electronic payment services, not online banking services. Finally, the court refused plaintiff’s request for attorney’s fees because defendant did not act fraudulently, in bad faith, or with malice.

Plaintiff moved for summary judgment on defendant’s remaining claim of infringement of its registered mark NETBANK and for cancellation of the NETBANK registration.

The court initially analyzed whether defendant’s acquisition of the NETBANK trademark registration and the “netbank.com” domain name was an invalid assignment in gross, i.e., a transfer without the accompanying goodwill. Plaintiff argued that the assignment was invalid because there was no physical transfer of assets from the prior owner. Defendant responded that the domain name itself was a “significant tangible asset.” The court declined to decide whether a domain name was a “tangible” asset despite evidence that domain names have sold for millions of dollars. The court noted that an assignment of a trademark without the transfer of physical assets will be valid only if the assignee provided a product or service “substantially similar to that of the assignor” so that consumers would not be deceived or harmed.

Here, however, defendant did not offer a “substantially similar” service to that of the original registrant, which offered a system allowing persons to buy or sell low-cost items over the Internet using electronic “pocket change.” Defendant instead used the mark for traditional banking services and even changed the bank name from NetBank to NetB@ank. Therefore, the court held that the NETBANK trademark was invalid and cancelled the NETBANK [[federal trademark reistration|registration.

The court also granted plaintiff’s motion for summary judgment on defendant’s counterclaim that plaintiff was guilty of unfair competition by deliberately deceiving its customers by passing off its services as those of defendant. Finally, the court reiterated its earlier reasoning for denying plaintiff’s request for attorney’s fees.

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