GATEWAY 2000, INC., Plaintiff, v. GATEWAY.COM, INC. & ALAN
B. CLEGG, Defendants.

No. 5:96-CV-1021-BR(3)


1997 U.S. Dist. LEXIS 2144

February 6, 1997, FILED

  DISPOSITION:     Plaintiff's motion for a preliminary injunction is DENIED.

COUNSEL: For GATEWAY 2000, INC., plaintiff: George R. Ragsdale, Ragsdale, Liggett & Foley, Raleigh, NC.

 For GATEWAY.COM, INC., ALAN B. CLEGG, defendants: J. Jerome Hartzell, John R. Rittelmeyer, Hartzell & Whiteman, Raleigh, NC.

 For GATEWAY.COM, INC., ALAN B. CLEGG, counter-claimants: J. Jerome Hartzell, John R. Rittelmeyer, Hartzell & Whiteman, Raleigh, NC.

 For GATEWAY 2000, INC., counter-defendant: George R. Ragsdale, Ragsdale, Liggett & Foley, Raleigh, NC.

JUDGES: W. EARL BRITT, United States District Judge



   This matter is before the court on plaintiff's motion for a preliminary injunction. Having reviewed the documents submitted by both parties and having heard oral argument in open court, the court finds as follows.

   I. Background

   Plaintiff Gateway 2000, Inc. is a Fortune 500 company operating in the personal computer industry. (Compl. P 8.) Founded in 1985, the company manufactures and distributes a wide variety of personal computer products. (Id. P 9.) In 1995, annual sales approached $3.7 billion and approximately 1,338,000 personal computers were shipped to various locations across the globe. (Id. PP 8, 10.) In achieving its status as one of the most prominent players in the computer industry, plaintiff has expended considerable resources in promoting its corporate image and advertising its products to potential consumers. (Id.) To this end, plaintiff represents that, since 1988, it has allotted more than $100 million for advertising alone. (Id. P 13.) Plaintiff further alleges that, during this process, both the full name, Gateway 2000, Inc., and a shortened version, Gateway, have been used to identify the company and its products. (Id.) Notably, plaintiff registered the Gateway 2000, Inc. trademark in 1993 but has not obtained registration for the shortened version, Gateway. (Hey Aff., Ex. B.)

   Defendant n1 is also involved in the computer industry. In contrast to plaintiff's manufacturing and selling of computers and related devices, however, defendant offers computer consulting services to interested parties. (Compl. P 17). In May 1988, defendant apparently began to use for his electronic address. (Clegg. Aff. P 4.) In August 1990, he registered this domain name with SRI International, the Internet registrar at the time.      (Id.) Defendant currently uses this address to conduct communications with clients and to inform other interested parties about his consulting business. (Id. P 15.)

   n1 The court recognizes that there are officially two defendants. However, as Mr. Clegg is the sole employee, officer, and shareholder of the company, the court will refer to the named defendants as a single entity.

    Defendant has represented that Internet users often visit his website when actually searching for plaintiff's website. (See Clegg ltr. dated 9/4/96.) As such, plaintiff contacted defendant and requested that defendant discontinue its use of the domain name and permit plaintiff to assume the address. (Clegg Aff. P 11.) On several occasions, defendant has refused to relinquish the rights to the website. (Id.) Consequently, plaintiff seeks recourse in this court and alleges that defendant's use violates plaintiff's trademark rights. Specifically, plaintiff contends that defendant's conduct constitutes trademark infringement in violation of 15 U.S.C. § 1114, unfair competition in violation of 15 U.S.C. § 1125(a), trademark dilution in violation of 15 U.S.C. § 1125(c), and additional violations of state trademark and unfair competition laws. n2

   n2 The court notes in passing that it does not appear that defendant selected and registered the domain name merely to later extract a premium from plaintiff. Unlike so-called cyber-squatters, defendant operates and has operated for some time a computer business using this name and address. Despite plaintiff's representations to the contrary, this case does not merely involve opportunistic behavior or some form of exploitation on the part of defendant.

    II. Preliminary Injunction Standard

   It is well established in this circuit that a court must consider four factors when reviewing whether a moving party is entitled to preliminary injunctive relief. Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4th Cir. 1977). These factors are as follows:

 1) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied, 2) the likelihood of harm to the defendant if the requested relief is granted, 3) the likelihood that the plaintiff will succeed on the merits, and 4) the public interest.

 Rum Creek Coal Sales, Inc. v. Caperton, 926 F.2d 353, 359 (4th Cir. 1991). In trademark cases, the primary focus converges on the likelihood of success  prong. See Lone Star Steakhouse & Saloon v. Alpha of Va., Inc., 43 F.3d 922, 938-39 (4th Cir. 1995).

   To warrant a preliminary injunction, the moving party bears the burden of demonstrating that it satisfies the four-part test. SCFC IL, Inc. v. VISA USA, Inc., 936 F.2d 1096, 1099 (10th Cir. 1991). When discussing the extent of the movant's burden, the Fourth Circuit has distinguished between preliminary injunctions requesting affirmative or mandatory relief and those merely seeking to maintain the status quo. Wetzel v. Edwards, 635 F.2d 283, 286 (4th Cir. 1980). Indeed, preliminary injunctions for mandatory relief, such as the one requested here, are "sparingly exercised" and subject to a more exacting standard of review. Id. With these principles in mind, the court turns to the issues at hand.

   III. Discussion

   As there is some dissonance in argument between plaintiff's initial memorandum in support of the preliminary injunction and the ensuing reply brief and oral argument, the court will treat the motion as relying on both the dilution claim under § 1125(c) and the infringement claim under § 1125(a).

   A. Trademark Dilution Claim

   In alleging that defendant's use of the domain name,, should be enjoined, plaintiff sets forth 15 § 1125(c)(1) (Supp. 1996). This section provides:

 The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such relief as is provided in this subsection.

 § 1125(c)(1). Since its promulgation, this provision has been employed in cases addressing the unique interplay between Internet domain names and trademark law. See Panavision Int'l, L.P. v. Toeppen, 945 F. Supp. 1296 (C.D. Cal. 1996) (enjoining defendant's use of as domain name under the dilution statute).

   Yet, in triggering the protections of § 1125(c), plaintiff must satisfy the express conditions contained therein. Among others, plaintiff must demonstrate that it owns a famous mark and that the infringing use began after the mark became famous. § 1125(c)(1). Based on the affidavits and materials submitted by both parties, it appears that plaintiff will likely be able to establish ownership of a famous mark as contemplated by § 1125(c)(1). However, plaintiffs have not come forward with sufficient evidence regarding when the mark or marks became famous especially in relation to defendant's selection and use of the address and name. n3 Consequently, at this stage of the proceedings, it is not possible for the court to conclude that plaintiff has demonstrated a likelihood of success on this claim.

     n3 The court recognizes that questions exist as to whether defendant's use of as a USENET address in 1988 qualifies as commercial use in commerce. Notwithstanding, even if the court relies on the date in which defendant began to use as a domain name for his business website, plaintiff has still failed to show that its marks had become famous at the time.


   B. Trademark Infringement Claim

   In arguing for the propriety of a preliminary injunction on this claim, plaintiff seems to rely exclusively on the alleged infringement of its common law rights in the Gateway name. n4 Thus, the critical provision is § 1125(a) (Supp. 1996), commonly referred to as § 43(a) of the Lanham Act. This section reads as follows:

 (1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof . . . which

   (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . .

 § 1125(a)(1). Despite some confusion at the hearing, it is clearly established that § 1125(a) is designed to encompass federal infringement claims for unregistered or common law marks and names and does not merely extend to federally registered marks. Centaur Communications, Ltd. v. A/S/M Communications, 830 F.2d 1217 (2d Cir. 1987);   New West Corp. v. NYM Co. of Ca., Inc., 595 F.2d 1194 (9th Cir. 1979).

   n4 While plaintiff also brought a claim for infringement of its registered amrks under § 1114, based on the plaintiff's briefs and oral argument at the hearing, this count is apparently not being offered to sustain the preliminary injunction motion.

    To prevail under this section, plaintiff "must demonstrate that it has a valid, protectible trademark and that the defendant's use of a colorable imitation of the trademark is likely to cause confusion among consumers." Lone Star, 43 F.3d at 930. For purposes of establishing a valid, protectible trademark for an unregistered mark, plaintiff must show that the mark is distinctive and was used prior to defendant's use. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 120 L. Ed. 2d 615, 112 S. Ct. 2753 (1992); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 60 L. Ed. 713, 36 S. Ct. 357 (1916).

   Although the court is persuaded that plaintiff will likely be able to fulfill the requirement of distinctiveness by either establishing that the mark is suggestive or descriptive with secondary meaning, questions arise as to the order of use. Plaintiff has submitted several documents indicating that the  company was founded before defendant's first use and that plaintiff initiated advertising campaigns prior to defendant's assumption of the mark. Yet, the court is unclear regarding the scope of plaintiff's use at this time and whether the simple Gateway name was used. To merit a preliminary injunction arising from this claim, plaintiff must show that the name Gateway was used to identify the company before defendant's use began.

   This inquiry is slightly different than merely looking to whether the Gateway 2000 mark was used at this point. As plaintiff apparently elected not to rely on alleged confusion with its federally registered mark and its official corporate title during the preliminary injunction hearing, see Cardservice Int'l, Inc. v. McGee, 1997 WL 16795, (E.D. Va. Jan. 16, 1997) (noting that minor differences between a registered mark and unauthorized use of such mark do not preclude liability under § 1114(1)), plaintiff was obligated to provide direct evidence of its use of the term Gateway. This showing has not been made. In fact, the majority of plaintiff's examples regarding the use of the term Gateway to identify the company occurred after defendant's alleged use of the mark. (See Haslam Aff. Exs.) Thus, again, the stumbling block for plaintiff on its common law infringement claim is the uncertainty about timing and extent of use. In light of the above, the court does not reach the likelihood of confusion element.

   Although plaintiff has offered considerable evidence on several of the requirements in each trademark provision, it has not provided sufficient information to infer a likelihood of success on the merits. Uncertainty surrounding the temporal issues discussed above complicates plaintiff's case at this stage of the proceedings and precludes the issuance of a preliminary injunction. While the court is aware of several recent cases enjoining a defendant's use of a domain name that is confusingly similar to a plaintiff's corporate identity or product, see, e.g., Cardservice, 1997 WL 16795 at *7; Panavision, 945 F. Supp. at 1305; ActMedia, Inc. v. Active Media Int'l, Inc., 1996 WL 466527 (N.D. Ill.  July, 17, 1996) (unpublished); Comp Exam'r Agency, Inc. v. Juris, Inc., 1996 WL 376600 (C.D. Cal. Apr. 26, 1996) (unpublished); Hasbro, Inc. v. Internet Entertainment Group, Ltd., 1996 WL 84853 (W.D. Wash. Feb. 9, 1996) (unpublished), the facts as developed at this time do not justify the same result.

   IV. Conclusion

   In accordance with the above, plaintiff's motion for a preliminary injunction is DENIED.

   This 6 February 1997.