11/04/20

COURT FINDS U.S. JURISDICTION OVER NON-U.S. WEBSITE OPERATOR

Timothy J. Lockhart

The U.S. Court of Appeals for the Fourth Circuit found that a Russian website operator residing in Russia was subject to specific personal jurisdiction in Virginia.  UMG Recordings, Inc. v. Kurbanov, 963 F.3d 344 (2020).  Twelve U.S. record companies sued a Russian named Tofig Kurbanov for operating two websites, www.flvto.biz and www.2conv.com (Websites), that offer visitors a “stream-ripping” service for extracting audio tracks from videos.  The record companies alleged that such stream ripping from their music videos infringed the copyrights in those videos.

Kurbanov’s stream-ripping services are free, so virtually all of the revenue generated from the Websites comes from advertising.  Kurbanov does not sell such advertising directly; rather, he sells ad space to brokers, at least two of which are based in the United States.  Because the Websites’ privacy policies permit the collection of visitors’ internet-protocol addresses and countries of origin, the sites enable the placement of advertising targeted toward visitors’ physical locations.

The court said that “[t]he Websites are successful, in part, because they are two of the most popular stream-ripping websites in the world and are among the most popular websites of any kind on the Internet.”  Kurbanov’s data showed that between October 2017 and September 2018 the Websites attracted well over 300 million visitors from over 200 countries around the world with over 30 million visitors (or about 10 percent of all traffic) being from the United States.  Of the visitors to flvto.biz and 2conv.com, U.S. visitors ranked third and fourth, respectively, in number.  Nearly 500,000 (or about 2 percent) of the U.S. visitors to flvto.biz were from Virginia (ranking it 13th among U.S. states), and about 95,000 (again about 2 percent) of 2conv’s U.S. visitors were from Virginia (ranking it 11th among U.S. states).

The Websites have other connections to the United States and Virginia.  Their two domain names are registered with GoDaddy.com, a U.S.-based registrar, and their top-level domains .biz and .com are administered by the Neustar, Inc. (flvto.biz) and VeriSign, Inc. (2conv.com), both of which are headquartered in Virginia.  Kurbanov registered a Digital Millennium Copyright Act agent with the U.S. Copyright Office, and until July 2018 Amazon Web Services, which has servers physically located in Virginia, hosted the Websites.

On the other hand, Kurbanov operates the Websites entirely from Russia.  He has never had any U.S. employees, owned or leased any U.S. real estate, owned a U.S. bank account, or paid taxes in the United States.  He has never traveled to the United States, does not have a visa to do so, and claimed that it would be difficult for him to obtain such a visa.

The U.S. District Court for the Eastern District of Virginia granted Kurbanov’s motion to dismiss for lack of personal jurisdiction.  The court stated that the Websites are only semi-interactive, visitors’ interactions with them are non-commercial in nature, and there were no other acts by Kurbanov that established purposeful targeting.  Finding that Kurbanov did not purposefully avail himself of the benefits and protections of either Virginia or the United States, the court concluded that exercising personal jurisdiction over Kurbanov would violate due process under Rules 4(k)(1) and 4(k)(2) of the Federal Rules of Civil Procedure.

Rule 4(k)(1) provides that the district court may exercise personal jurisdiction over Kurbanov if he is “subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.”  Similarly, Rule 4(k)(2) provides that the district court may exercise personal jurisdiction over Kurbanov if he is “not subject to jurisdiction in any state’s courts of general jurisdiction” and doing so would be consistent with constitutional due process.

The court of appeals said that under Rule 4(k)(1) the “exercise of personal jurisdiction over Kurbanov is lawful “if [1] such jurisdiction is authorized by the long-arm statute of the state in which it sits and [2] the application of the long-arm statute is consistent with the due process clause of the Fourteenth Amendment” (citation omitted).  The court noted that Virginia’s long-arm statute, Va. Code Ann. § 8.01-328.1(A)(1), extends personal jurisdiction over nonresident defendants to the full extent permitted by the Fourteenth Amendment’s Due Process Clause (citations omitted).  The appellate court said that the due-process analysis under Rule 4(k)(2) is the same, only applied to the entirety of the United States as opposed to Virginia.

The court of appeals said it had “synthesized the due process requirements for asserting specific personal jurisdiction into a three-prong test:  ‘(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs’ claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable’” (citing Consulting Eng’rs Corp. v. Geometric Ltd., 561 F.3d 272, 278 (4th Cir. 2009) (quoting ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002) (quotations and citations omitted)).

Applying that test, the court found that Kurbanov had purposefully availed itself of the privilege of conducting activities in Virginia.  The court pointed to the number of Virginia visitors to the Websites; the fact that, based on the sites’ advertising, such visits constitutes a commercial relationship; and the profits Kurbanov derived from “selling directed advertising space and data collected to third-party brokers.”  The court also pointed to the facts that Kurbanov had registered a Digital Millennium Copyright Act agent with the U.S. Copyright Office, “thereby qualifying the Websites for certain safe harbor defenses to copyright infringement claims,” had contracted with U.S.-based advertising brokers, and had registered the Websites with U.S.-based domain registers and until recently relied on U.S.-based servers.  Taken together, the court said, these facts contradicted Kurbanov’s contention that he could not have anticipated being haled into court in Virginia.

With regard to whether the plaintiffs’ claims arise out of activities directed at Virginia, the court noted that Kurbanov had made “two globally accessible websites and Virginia visitors used them for alleged music piracy.”  Moreover, “Kurbanov knew the Websites were serving Virginian visitors and yet took no actions to limit or block access, all while profiting from the data harvested from the same visitors.”  Thus, the court concluded, “It is hardly surprising, then, that Kurbanov’s contacts with Virginia were ‘substantial and form[ed] a central part of [the plaintiffs’] claims’” (citing Tire Eng’g & Distrib., LLC v. Shandong Linglong Rubber Co., Ltd., 682 F.3d 292, 306 (4th Cir. 2012)).

With regard to the third prong of the test, the court of appeals said that because the district court had not performed a reasonability analysis in the first instance, the appellate court could not address that prong on appeal (citing Lovelace v. Lee, 472 F.3d 174, 203 (4th Cir. 2006) (emphasizing that the appellate court is “a court of review, not of first view” (internal quotation marks omitted)).  Accordingly, the court of appeals remanded the case to the district court to perform the required reasonability analysis.

 

TRADEMARK BOARD FINDS .CAM GENERIC FOR DOMAIN-NAME SERVICES

Timothy J. Lockhart

The U.S. Trademark Trial and Appeal Board (TTAB) has refused to register for a variety of services in International Classes 35, 38, 42, and 45 the designation .CAM in standard characters and in the form shown below.         

 

In re AC Webconnecting Holding B.V., 2020 U.S.P.Q.2d 11048 (September 15, 2020) [precedential] (Opinion by Judge Peter W. Cataldo).  The TTAB found that AC Webconnecting Holding B.V. (AC) failed to show that .CAM functions as a trademark in addition to its acknowledged function as a generic top-level domain name (gTLD).

AC filed two applications to register .CAM on the Supplemental Register of the U.S. Patent and Trademark Office (USPTO), basing the applications, under Section 44(e) of the Trademark Act, 15 U.S.C. § 1126(e), on two European Union registrations for the marks.  The USPTO Examining Attorney assigned to the applications refused to register the marks on the grounds that they “do not function as source indicators and are incapable of distinguishing Applicant’s services from those of others or indicating the source of [AC’s] services.”  AC appealed the refusal to the TTAB.

In 2011 the Internet Corporation for Assigned Names and Numbers (ICANN), the organization that helps to govern the use of top-level domains (TLDs), authorized the introduction of numerous new generic TLDs or gTLDs.  The USPTO has acknowledged that some of these gTLDs “may have significance as source identifiers.”  TMEP § 1215.02.  After filing its U.S. applications, AC entered into a registry agreement with ICANN, designating AC as the registry operator for the .CAM gTLD.  A “registry operator” maintains the master database of all domain names registered in each top-level domain and generates the “zone file” that allows computers to route Internet traffic to and from top-level domains.  In contrast, a “registrar” registers domain names, keeps website contact information records, and submits technical information to a central directory, i.e., the “registry.”

Although AC’s applications did not specifically identify registry operator or registrar services, its recitation of Class 45 services include domain name registration, conducting domain name searches, legal services, and consulting, all related to the .CAM gTLD.  Thus, the TTAB found that “the services identified in the involved applications encompass registry operator services for purposes of our determination of whether the applied-for .CAM designations are capable of functioning as indicators of source.”

The TTAB said that for any proposed mark, including a gTLD, determining whether the designation can function as a mark focuses on consumer perception (citing United States Patent and Trademark Office v. Booking.com B.V., 140 S. Ct. 2298, 2305-07 (2020) (holding that the designation BOOKING.COM was not generic for hotel-booking services)).  In the Booking.com case the U.S. Supreme Court rejected the rule then advocated by the USPTO that combining a generic term with a gTLD such as “.com” almost always results in a generic designator.  Still, the TTAB said, “Unless there is evidence in the record indicating to the contrary, we observe that gTLDs almost invariably would be perceived by consumers as serving purposes other than source-identification.”

The TTAB began its review of the record by noting that “cam” is short for “camera” and that AC’s website claimed the .cam gTLD was “designed to make [it] easier for Internet users by offering the use of appropriate namespaces for individuals, organizations and companies [with] sites or services that are affiliated with camera, photography or film.”  The TTAB also noted that although AC’s applications were not based on use of its designations in U.S. commerce, the evidence of record, including AC’s E.U. service mark registrations, suggested how U.S. consumers would perceive the designations.

The TTAB said that if it found the .CAM designations “incapable of distinguishing source with regard to at least one service in each of Classes 35, 38, 42 and 45, the proposed marks are unregistrable as to all refused services recited in those classes” (citing In re Stereotaxis Inc., 429 F.3d 1039 (Fed. Cir. 2005) (other citation omitted).  The TTAB held that because both AC’s evidence and third-party evidence showed that .CAM, whether in standard characters or in its stylized and colored form, was perceived as a gTLD, the designation was “incapable of identifying and distinguishing, at least, [AC’s] domain name registration and related services in Class 45” (citation omitted).  Similarly, the TTAB held that .CAM did not function as a service mark with respect to AC’s domain-name-related services in Classes 35, 38, and 42.

With respect to AC’s other services in Classes 35, 38, and 42, however, the TTAB found that .CAM could function as a mark with respect to the following services not specifically related to domain names (and for which the Examining Attorney had withdrawn the refusal to register the marks):

“Accounting consultation; business advice and information relating to loans, finance and capital; business assistance, advisory and consulting services in the field of filing business formation documents; economic feasibility studies; payroll administration and management services; payroll preparation; development of processes for the analysis and the implementation of strategy plans and management projects,” in Class 35;

“Rental of telecommunication equipment, namely, facsimile machines,” in Class 38; and

“Consulting services in the field of office and workplace automation,” in Class 42.

Accordingly, the TTAB said, “The involved applications will proceed to registration for those services against which the refusal to register was withdrawn.”

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