BREYER, District Judge:
Appellant David Lahoti appeals from the district court's finding, on remand, that he violated the Lanham Act, the Anticybersquatting Consumer Protection Act (ACPA), the Washington Consumer Protection Act (WCPA), and Washington common law. The appeal turns in significant part on whether the district court followed this court's instructions on remand in finding
The underlying facts of this case are set out in detail in Lahoti v. VeriCheck, Inc., 586 F.3d 1190 (9th Cir.2009), and will not be repeated here. In that case, we affirmed the district court's finding that Lahoti acted in bad faith. Id. at 1202-04. We included a detailed discussion of the principles involved in differentiating between suggestive (i.e., distinctive) and descriptive trademarks. Id. at 1196-1202. Following that discussion, we held that, "[w]hile the district court perhaps could have relied exclusively on the registration of the Arizona Mark to determine suggestiveness, it did not do so," but instead "improperly required that the Mark describe all of Vericheck's services, examined the Mark in the abstract, and concluded that it could not analyze the Mark's component parts." Id. at 1204. Accordingly, we vacated the district court's judgment and remanded. Id. We did not reach "the district court's conclusions that Vericheck established all other elements of its trademark infringement, ACPA, and WCPA claims, and that Vericheck was entitled to attorneys' fees." Id.
On remand, the district court considered our opinion and post-appeal briefing; it did not augment the record. In its Amended Findings of Fact and Conclusions of Law, the district court discussed the principles we articulated, and concluded, again, that the VERICHECK mark is suggestive. The court further found that the mark is strong and entitled to protection. The court concluded that Lahoti had violated the ACPA, and found that Lahoti's use of the mark constituted infringement. The court again held that Lahoti violated the WCPA, and that Vericheck was entitled to an injunction, the maximum statutory damages, and attorneys' fees and costs.
Lahoti again appealed.
We review a district court's classification of a trademark's strength for clear error. Lahoti, 586 F.3d at 1195. Accordingly, "we defer to the lower court's determination unless, based on the entire evidence, we are possessed of a definite and firm conviction that a mistake has been committed." Id. at 1196 (internal quotation marks omitted).
We also review a lower court's determination of the likelihood of confusion for clear error. See Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1172-73 (9th Cir.2007). However, we review interpretations of state law, such as the WCPA, de novo. Id. at 1173. We also review de novo whether a trademark case is exceptional under 15 U.S.C. § 1117(a). Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1216 (9th Cir.2003). But we review for abuse of discretion a district court's award of attorneys' fees in an "exceptional case." Id.
The main issue in this appeal is whether the district court properly found that Vericheck's mark is distinctive; "Vericheck cannot prevail on its trademark claims unless its Disputed Mark is distinctive." Lahoti, 586 F.3d at 1197. A suggestive mark is inherently distinctive, but a descriptive mark that lacks secondary meaning is not distinctive and is not entitled
Lahoti argues that the district court repeated the same errors on remand that it made initially, demonstrating a failure to analyze the VERICHECK mark in its industry context. In the original appeal, we noted three errors. First, the district court seemed to require that, in order to be considered descriptive, the VERICHECK mark would have to describe the "broad array of electronic transaction processing services that Vericheck provides." Lahoti, 586 F.3d at 1201. Second, the district court found that the VERICHECK mark could have described services unrelated to those offered by Vericheck, when in fact the mark must be evaluated "as if it were seen on the goods or services." Id. (internal quotation marks omitted). And third, the district court improperly declined Lahoti's request that the mark be broken down into its component parts. Id. We conclude that the district court rectified these errors on remand.
Analyzing the case anew on remand, the district court indisputably recited the relevant legal principles that we set out. The district court then went on to find that, "[w]hen viewed in the context of Vericheck's services, whether in whole or in part, including Vericheck's check verification services, the VERICHECK mark does not immediately convey information about the nature of Vericheck's services." The district court explained that, "in reaching [its] conclusion," it "considered the component parts of the VERICHECK mark `as a preliminary step on the way to an ultimate determination of the probable consumer reaction to the composite as a whole.'" Thus, the district court conducted its analysis as instructed.
Moreover, the holding that it reached as a result of that analysis was not clearly erroneous. "If consumer response requires any sort of `multistage reasoning process' to identify the characteristic of the product which the mark suggests, then the mark should not be regarded as `merely descriptive.'" 3 Louis Altman & Malla Pollack, Callmann on Unfair Competition, Trademark and Monopolies § 18:10 (4th ed. Supp.2010). Here, for example, consumers must separate "veri" from "check" and reason that "veri" is short for "verification services." In addition, similar marks have been found to be suggestive. See, e.g., Pilot Corp. of Am. v. Fisher-Price, Inc., 501 F.Supp.2d 292, 303 (D.Conn.2007) (holding that "Magna Doodle" is only suggestive of children's magnetic drawing toy, noting that it "requires some imagination to get from `magna' to `magnetic'"); In re Shutts, 217 U.S.P.Q. (BNA) 363, 364-65 (T.T.A.B.1983)
Moreover, the district court based its holding that the VERICHECK mark is distinctive not only on its own analysis of distinctiveness, but also on the PTO's 1975 issuance of a trademark to the Arizona company, also for check verification services. In the first appeal, we "agree[d] with the district court that the PTO's registration of the Arizona Mark is evidence
Lahoti argues, however, that the district court erred by failing to consider material changes in fact and law since 1975.
We owe a great deal of deference to the district court's trademark classification. The district court's initial conclusion was based "in part on reasoning that is contrary to federal trademark law." Id. at 1201. On remand, it recited the correct law, and it applied that law properly. Accordingly, the district court's conclusion that the mark is distinctive is AFFIRMED. See also id. at 1198 (noting "only a handful of published opinions in the past forty years in which a district court's determination that a mark is suggestive rather than descriptive was held to be clearly erroneous").
Lahoti further appeals the district court's holding that the domain name www.vericheck.com is likely to be confused with the VERICHECK mark. Courts analyzing the likelihood of confusion look at eight factors: (1) the strength of the mark; (2) the similarity of the marks; (3) proximity of the goods/services; (4) similarity in the marketing channels used; (5) the type of goods/services and the degree of care likely to be exercised by purchasers; (6) evidence of actual confusion; (7) defendant's intent in selecting its mark; and (8) likelihood of expansion into other markets. See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341-49, 348 (9th Cir.1979), abrogated on other grounds by Mattel Inc. v. Walking
Here, the VERICHECK mark and the www.vericheck.com domain name are, as the district court found, identical or confusingly similar. See Pub. Serv. Co. of N.M. v. Nexus Energy Software, Inc., 36 F.Supp.2d 436, 439 (D.Mass.1999) ("e NERGYplace" and "energyplace.com" "look virtually identical and sound identical"). This factor weighs in favor of Vericheck.
Second, the district court found that Lahoti uses www.vericheck.com to provide services that compete with Vericheck. Lahoti protests that, while Vericheck provides check verification services, www.vericheck.com was an unrelated "directory-style website." However, the district court found that Lahoti's website "includes links to companies offering services that compete with those of Vericheck, such as <safepayment.com>, as well as to websites that offer `Online Payments' and `Merchant Processing.' " Lahoti does not dispute those facts, protesting only that he "had no ability to control the search results." This is of little import; that Lahoti sent visitors to competitors at all justified the district court's finding that his website competed with Vericheck's business. This factor weighs in favor of Vericheck.
Third, the district court found that Lahoti and Vericheck both used the Internet as a marketing channel. Lahoti argues that this is an oversimplification, because he markets to consumers while Vericheck markets to businesses. He does not cite to the record in support of this point, however, so the district court's finding must be affirmed. But presuming Lahoti is correct, this factor would not weigh strongly in Vericheck's favor. See Interstellar Starship Servs., Ltd., 304 F.3d at 943 (where parties marketed to different online customer bases, court properly balanced remaining Sleekcraft factors). Therefore, although the internet trinity suggests a likelihood of confusion, we will address the remaining Sleekcraft factors.
Strength of the mark is determined with a two-part test. GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1207 (9th Cir.2000). The first part is conceptual strength. See id.; 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 11:83 (4th ed. Supp. 2010). We have already concluded that the district court properly found that VERICHECK is a suggestive mark. The second part is commercial strength, or the marketplace recognition value of the mark. Id. The district court properly considered and rejected Lahoti's argument that the VERICHECK mark was rendered weak by a "crowded field of third-party users." The district court examined the three prior uses Lahoti raised, noted that there was "no credible evidence" that any of them
Next is evidence of actual confusion. Sleekcraft, 599 F.2d at 352. On this point, two witnesses testified on behalf of Vericheck that there has been significant confusion as a result of the www.vericheck. com website. The evidence shows that Vericheck and its independent sales offices and resellers receive a substantial number of telephone calls from confused customers who could not find information about Vericheck on www.vericheck.com.
Lahoti argues, however, that the district court should not have considered the evidence of confusion, because it was hearsay.
The district court noted that "[n]either party presented evidence regarding the likelihood of expansion," and so this factor is neutral.
Also, if a typical consumer of the goods or services at issue exercises a high degree of care in purchasing the kind of good or service at issue, this weighs against finding a likelihood of confusion. Sleekcraft, 599 F.2d at 353. The district court found that "[e]xercising an average degree of care, a potential purchaser could conceivably visit <vericheck.com> instead of <vericheck.net> and consequently become frustrated or confused by the myriad links found there." That reasoning is valid. See Electropix v. Liberty Livewire Corp., 178 F.Supp.2d 1125, 1134 (C.D.Cal. 2001) (holding that "virtually no amount of consumer care can prevent confusion where two entities have the same name"). This factor weighs in favor of Vericheck.
Finally, we already affirmed the district court's finding that Lahoti acted in a bad faith attempt to profit from his use of the VERICHECK mark. Lahoti, 586 F.3d at 1202-04. This factor, too, weighs in favor of Vericheck.
The internet trinity, combined with the remaining Sleekcraft factors, weigh overwhelmingly in favor of Vericheck. Accordingly, we AFFIRM the district court's finding of a likelihood of confusion.
Lahoti also appeals the district court's finding that he is liable for cybersquatting under the ACPA. Cybersquatting is the bad faith registration of a domain name
Lahoti additionally appeals the district court's holding that he violated the WCPA. To prove a violation of the WCPA, a plaintiff must demonstrate that (1) the action complained of is an unfair act or practice; (2) in the conduct of trade or commerce; (3) affecting the public interest; (4) injuring business or property; (5) and with a causal link between the deceptive act and the injury suffered. See Nordstrom, Inc. v. Tampourlos, 107 Wn.2d 735, 733 P.2d 208, 210 (1987).
Confusion of the public typically satisfies the "public interest" element of the WCPA. Id. at 212. Lahoti argues that the district court erred in finding that he violated the WCPA, because "the inadvertent infringement of a weak mark is not sufficient to qualify as a public interest." Seattle Endeavors, Inc. v. Mastro, 123 Wn.2d 339, 868 P.2d 120, 127 (1994). But this is not a case of inadvertent infringement. First, Lahoti acted in bad faith. Lahoti, 586 F.3d at 1202-04. Second, we have concluded that the VERICHECK mark was both distinctive and strong. Finally, though Lahoti argues that there is no admissible evidence that anyone in Washington State was actually confused, there is a likelihood of confusion, and there was testimony about significant actual confusion and testimony that Vericheck has numerous customers in Washington State.
Lahoti challenges the district court's grant of attorneys' fees under the Lanham Act and under the WCPA. He further opposes Vericheck's request for appellate fees.
Pursuant to 15 U.S.C. § 1117(a), the court may award reasonable attorneys' fees to the prevailing party in exceptional cases. Exceptional cases include cases in which the infringing party acted maliciously, fraudulently, deliberately or willfully. See Gracie v. Gracie, 217 F.3d 1060, 1068 (9th Cir.2000). The district court determined that this case was exceptional, citing Lahoti's willful registration and use of the www.vericheck.com domain name, his "attempt to extort thousands of dollars from Vericheck," his disregard for Vericheck's trademark rights, his "pattern and practice of cybersquatting, including a pattern and practice of abusive
Lahoti argues that this case is not exceptional and compares it to Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400 (9th Cir.1993). But Lindy Pen involved unintentional infringement. Id. at 1406. This case does not. We have already affirmed the district court's holding that Lahoti acted in bad faith. Lahoti, 586 F.3d at 1202-04. Indeed, "bad faith of one of the parties may be part of those exceptional circumstances warranting a fee award." Stephen W. Boney v. Boney Servs., Inc., 127 F.3d 821, 827 (9th Cir.1997) (internal quotation marks and alterations omitted). Based on Lahoti's bad faith and the other factors cited by the district court, this was indeed an "exceptional" case under 15 U.S.C. § 1117(a). In addition, we have no basis for concluding that the district court's award of $78,109.95 in fees and costs—an amount unchallenged by Lahoti—is an abuse of discretion. The district court's award of fees under 15 U.S.C. § 1117(a) is AFFIRMED.
Lahoti's argument that fees are not appropriate under the WCPA is simply that there was no violation of the WCPA. We have concluded otherwise. The fee award under the WCPA is therefore AFFIRMED.
Lastly, in its brief, Vericheck asks us to award it reasonable attorneys' fees as a sanction for Lahoti's frivolous appeal. Fed. R.App. P. 38; 28 U.S.C. § 1912. As a preliminary matter, such a request must be made in a separately filed motion. See Fed. R.App. P. 38; Gabor v. Frazer, 78 F.3d 459, 459-60 (9th Cir.1996) (order) (holding that Rule 38 request for sanctions in party's appellate brief does not provide sufficient notice to opposing party). That procedural issue notwithstanding, Lahoti's arguments of error are not "wholly without merit." See McConnell v. Critchlow, 661 F.2d 116, 118 (9th Cir.1981). Accordingly, this request is DENIED.
For the foregoing reasons, we AFFIRM the district court's order, and DENY Vericheck's request for appellate fees.
