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A man who rushed to register dozens of Internet domain names after being ordered by a would-be competitor to stop using a single domain name has been given a second chance by the 2nd U.S. Circuit Court of Appeals. The 2nd Circuit lifted part of a preliminary injunction against Richard S. Haar, who runs a communications company from his Manhattan apartment. The court said that many of the registered names are not protected by the Federal Trademark Anti-Dilution Act. The conflict centered on Haar’s own plans for an Internet portal geared to children’s merchandise and the rights of a company that sells children’s clothing in more than 200 stores. The court found that when Congress passed the act, it did not intend to protect descriptive, non-distinctive marks. “Against a background of policies that strongly disfavor marks lacking inherent distinctiveness, according them only narrow protection, we think it highly unlikely that Congress intended to extend to such marks the expanded rights conferred by the Dilution Act,” Judge Leval said. “We conclude that the Dilution Act accords its special, broad protection only to marks that have a significant degree of distinctiveness.” However, the 2nd Circuit, in TCPIP Holding Company Inc. v. Haar Communications Inc., 2001 U.S. App. LEXIS 2867, also upheld a lower court’s decision to grant an injunction against Haar because several of the names were so similar that they would probably confuse consumers. MULTIPLE NAMES TCPIP Holding Company, which owns the mark “The Children’s Place” for the children’s clothing and accessories it sells in 228 stores, became upset when Haar registered the domain name “thechildrensplace.com” in November 1998. Lawyers for TCPIP, which had registered just two domain names, including “childrensplace.com,” told Haar by letter to cease and desist. Haar responded by registering 66 more domain names, all containing variations of the words “children” and “place,” and then called TCPIP to discuss selling the names to the company. After the chief executive officer of the company declined to discuss Haar’s proposal for a joint venture for the Internet portal, Haar demanded a payment of $570,000 for 35 of the names. He later increased the offer to include 44 names, at a cost of $697,000. And when the executive offered to pay $30,000 for “thechildrensplace.com” alone, Haar refused. TCPIP sued under the Anti-Dilution Act, 15 U.S.C. �1125(c) and for infringement of its mark under Section 43(a) of the Lanham Act, 15 U.S.C. �1125(a). Southern District Judge Richard Conway Casey granted the company’s motion for a preliminary injunction that prevented Haar from using the names. The 2nd Circuit, in an opinion authored by Judge Pierre N. Leval, upheld Judge Casey on the Lanham Act issue, but reversed his decision regarding the Anti-Dilution Act. At issue, Judge Leval said, is whether the act was designed to protect owners of descriptive marks, those that “describe a product or its attributes,” but “lack a distinctive quality as marks.” “A store that specializes in children’s merchandise is a children’s place — a place that sells children’s merchandise, a place to buy what children need,” and is thus “highly descriptive,” he said. Judge Leval said the question posed by Haar’s case is whether “the special broad protection of the Dilution Act is available to a descriptive mark,” which is “considered non-distinctive and weak under trademark law.” The Dilution Act, he said, “permits the owner of a qualified, famous mark to enjoin junior uses through commerce, regardless of the absence of competition or confusion.” But even if the mark is famous, he said, it falls outside the protection of the act if it is “weak” and “non-distinctive.” Here, he said, TCPIP not only failed to show that its mark was famous, but that its mark also lacked the “inherent distinctiveness” required by the act. Haar did not fare as well under the Lanham Act, where the 2nd Circuit upheld Judge Casey’s decision to enjoin the use of many of the domain names because they “so closely resemble the plaintiff’s mark as to give rise to a likelihood of confusion.” BAD FAITH The court also said that Haar had demonstrated bad faith. “Haar registered at least 66 domain names after receiving plaintiff’s initial demand letter,” he said. “It thereafter made exorbitant demands. It refused plaintiff’s request to name a price for ‘thechildrensplace.com,’ offering instead packages of sixteen or more names at prices around a half million dollars, and demanding plaintiff’s domain name, ‘childrensplace.com,’ in return.” “On the basis of this conduct, the district court found that Haar had acted in bad faith,” Judge Leval said. “And we cannot say the finding was unreasonable.” Judges Fred I. Parker and Robert Katzmann joined in the opinion. Keith E. Sharkin, Thomas H. Curtin and Robert M. Wasnofski, of Nims, Howes, Collison, Hansen & Lackert, represented TCPIP Holding Company Inc. Amy I. Don of Wincig & Wincig represented Haar.

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