December 1999

Society Wins Attorney's Fees in Web Case

Decision Awards Nearly $47,000

By Danielle D'Angelo

In a 50-page opinion handed down on December 2, Judge Leonard B. Sand of the U.S. District Court for the Southern District of New York awarded nearly $47,000 in attorney's fees to the NYSSCPA in its action against Eric-Louis Associates over the unauthorized use of the Society's "nysscpa" service mark.

"Judge Sand's decision is important not just for the Society but for all service mark owners," NYSSCPA Counsel James Woehlke said. "The sly practices of embedding someone else's service mark in a domain name and of including other companies' service marks as meta-tags now come at some cost to the Internet privateer."

The December ruling stems from a lawsuit that the Society filed in April against Eric-Louis Associates, which had used the "nysscpa" service mark in one of the company's websites, www.nysscpa.com, and had included "nysscpa" as one of its meta-tags--phrases used when registering websites with Internet search engines to encourage site traffic. Skolnick, Hochberg and Bernfeld PC, the Society's outside counsel for the case, had asked Eric-Louis Associates to cease and desist its practices, a request to which its president, Brian Elias, refused unless the Society purchased rights to the nysscpa.com domain name.

Elias' action forced the Society to ask the court for a temporary restraining order and permanent injunction--court orders requiring one party to act or refrain from acting in a particular way--both of which the court granted. The injunction, issued on June 1 with agreement by both parties' attorneys, required Eric-Louis Associates to transfer the nysscpa.com domain to the Society, remove nysscpa from its meta-tags, and cease "framing" the Society's website. The suit cost the Society more than $90,000 in legal fees.

"It was outrageous to me that one company could play loose with another's trademark, hold the trademark hostage, and in the end walk away without incurring any cost except its own legal fees," NYSSCPA Executive Director Louis Grumet said. "So, on the advice of both Counsel Woehlke and Skolnick, we asked the court to order Eric-Louis Associates to pay our legal fees."

The Lanham Act, the federal statute governing the registration and use of trademarks and service marks, permits the court to require one party to pay the prevailing party's legal fees but only in "exceptional circumstances," including fraud, bad faith, or willful infringement. Judge Sand found there was sufficient bad faith and willful infringement to order the payment of the Society's legal costs. He then applied equitable considerations due to the size of Eric-Louis Associates and awarded about half the cost incurred by the NYSSCPA.

According to Mark Skolnick, the Society's attorney, Judge Sand's opinion is unique because it included findings of facts and conclusions of law made after the court issued a permanent injunction against the defendant to cease and desist its unauthorized use of "nysscpa."

"To my knowledge, this procedure has never before been applied in an Internet case," Skolnick said. "This case stands for the proposition that the taking of another's good name will not be countenanced by the courts, regardless of how severe the consequences may be to the perpetrator."

Skolnick said the decision provides a weapon in the battle against "cybersquatting," a practice where individuals purchase domain addresses that closely resemble trademarked words or phrases solely for the purpose of selling the names for profit. Many companies settle out of court with cybersquatters since legal costs can escalate and often cost more than settlements.

"Indeed, a decision not to award the senior user [the Society] significant attorney fees in a case such as this would have the perverse effect of making it easier for the infringing junior user to extort a ransom payment from the senior user," Judge Sand stated in his ruling. "Faced with a choice between (a) paying, say, $20,000 for the domain name, and (b) expending significantly more on the less than certain prospect of securing a preliminary injunction, the rational senior user will choose (a) every time--unless, that is, he has a reasonable chance of recovering a significant portion of the fees expended for (b)."

Visit http://www.nysscpa.org to read the opinion. *


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