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Ninth Circuit Remands Cybersquatting Case to Western District

In 2007, the Western District of Washington found that counterclaim plaintiff Vericheck, Inc., had proven its cybersquatting case against counterclaim defendant David Lahoti. (STL post on the summary judgment order here; post on the bench trial decision here.)

Mr. Lahoti appealed. On Nov. 16, the Ninth Circuit vacated and remanded the district court’s finding that counterclaim plaintiff’s VERICHECK mark is distinctive. The Ninth Circuit separately affirmed the district court’s finding that counterclaim defendant had registered vericheck.com in bad faith.

On the distinctiveness issue, the court found:

“The district court erred to the extent it required that the Disputed Mark describe all of Vericheck’s services to qualify as ‘descriptive.’ The district court reasoned that the Disputed Mark does not ‘immediately call to mind the broad array of electronic transaction processing services that Vericheck provides.’ However, a mark does not have to meet this requirement to be found descriptive. The inquiry is ‘whether, when the mark is seen on the goods or services, it immediately conveys information about their nature.’

“The district court further erred when it reasoned that the Disputed Mark could have described services that are unrelated to those offered by Vericheck, such as baggage checking and pre-employment background verification. The mark must be evaluated as if it were ‘seen on the goods or services,’ which means the mark must be examined in the industry context rather than in the abstract.

“The district court also misapplied the law by asserting that ‘Lahoti improperly breaks down the mark into two component parts, ‘veri’ and ‘check,’ in order to argue that consumers will immediately presume that Vericheck provides ‘check verification’ services.’ Rather, courts may analyze all components of the mark in determining whether those parts, taken together, merely describe the goods or services offered.

In analyzing the compound ‘VeriCheck’ mark, the district court may therefore have broken the mark into ‘veri-’ and ‘check,’ to ‘separately view the component parts as a preliminary step on the way to an ultimate determination of probable customer reaction to the composite as a whole.’ Even though the district court ultimately analyzed the Disputed Mark’s component parts individually, we cannot be sure that the district court, having earlier misstated the law, properly accounted for those individual components.

“We conclude that the district court’s decision that the ‘VeriCheck’ mark was a distinctive, legally protectable mark under the ACPA and federal trademark law was based in part on reasoning contrary to federal trademark law and based in part on reasoning that could support the district court’s conclusion. Accordingly, because the district court did not rely exclusively on the proper legal standard, we vacate the judgment to the extent it determined the Disputed Mark was distinctive. We remand to permit the district court to determine whether the Mark is distinctive or descriptive taking into account the principles that we have outlined here.”

The case cite is Lahoti v. Vericheck, __ F.3d. __, 2009 WL 3807105, No. 08-35001 (9th Cir. Nov. 16, 2009).

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