Diarama Trading Co. v. J. Walker Thompson

Citation: Diarama Trading Co. v. J. Walker Thompson USA, Inc., 2005 WL 2148925 (S.D.N.Y. Sept. 6, 2005), aff'd, 194 Fed. Appx. 81 (2d Cir. 2007).

Factual Background
Plaintiff sold diamonds and diamond jewelry and used the federally registered mark DTC to identify itself and promote its business since 1997. Defendants include DeBeers, one of the world's leading diamond-mining companies, its American advertising agency ("JWT"), its American "sightholders" (i.e., DeBeers' authorized U.S. dealers, cutters, and polishers), and its subsidiary the Diamond Trading Company, Ltd.

Two of DeBeers' affiliates in South Africa and London operated under the name "Diamond Trading Company" since 1934 and 1986, respectively. Both affiliates have dealt with U.S. purchasers of DeBeers' diamonds. Since the 1950s, various diamond and jewelry industry publications have used the acronym DTC to refer to these DeBeers' affiliates, and since the 1980s DeBeers' own publications consistently used DTC as an abbreviation for both affiliates. In addition, numerous books published in the U.S. before 1997 used DTC to refer to one of the DeBeers' affiliates. And the DTC name appeared on the packaging for diamonds shipped to the U.S. by the South African affiliate.

In 1999, DeBeers launched a new worldwide consumer marketing campaign under the name "Diamond Trading Company" and the acronym DTC. As part of the launch, JWT registered the domain name "jtc.com" in May 2000, which functioned as the official website of the "Diamond Trading Company." In June 2000, DeBeers offered plaintiff $1,000,000 to transfer its U.S. trademark rights to DTC, but plaintiff refused.

Trial Court Proceedings
Plaintiff sued for infringement and cybersquatting. Defendants counterclaimed for cancellation of plaintiff's trademark registration. In an earlier decision, the district court denied plaintiff's motion for preliminary injunction, finding that plaintiff had not established a substantial likelihood of success on the merits because defendants had a "viable and good faith defense" of prior use of the DTC mark.

The defendants then moved for summary judgment on all of plaintiff's claims. Regarding the claims for infringement, false designation of origin, and unfair competition, defendants claimed they were in privity with DeBeers' "Diamond Trading Company" South African affiliate, which possessed prior trade name rights in the term DTC in the U.S. that were superior to plaintiff's.

The court agreed and granted summary judgment in defendants' favor. Defendants also argued that JWT was entitled to summary judgment on plaintiff's cybersquatting claim on two grounds. First, they contended that JWT's actions fell within ACPA's safe-harbor provision. The court disagreed, holding that the safe-harbor provision did not apply to JWT, because it was unclear whether JWT actually knew it was purchasing the domain name to promote lawful trade name use of DTC. However, JWT was entitled to summary judgment because it did not register "dtc.com" with a bad-faith intent to profit from plaintiff's mark.

The court held that the "vast majority" of the bad-faith factors favored JWT. Specifically, the first three factors favored JWT, because it purchased the domain name on behalf of a company with "superior rights" to the DTC mark. Moreover, JWT never attempted to divert internet traffic away from plaintiff, never offered to sell the domain name, never provided false contact information, and never registered multiple trademark-related domain names. The court thus granted summary judgment to defendants on all claims, and ordered the cancellation of plaintiff's federal trademark registration.

Appellate Court Proceedings
On appeal, the Second Circuit reviewed the record de novo and affirmed the judgment of the district court with no analysis, as the "correct result in this case."

This page uses content from Finnegan’s Internet Trademark Case Summaries. This is available under the GNU Free Documentation License.