2013.03.27

Overdrive, Inc. Found Liable For Cybersquatting: Plaintiff Awarded $74,500.00 Plus Reasonable Attorney Fees

Traverse Legal cybersquatting law attorneys obtained judgment on behalf of their client against full-service digital distributor of eBooks, audiobooks, music and video company Overdrive, Inc. for cyber-piracy (aka cybersquatting) and breach of contract.  On January 10, 2013, Judgment was entered in the United States District Court for the Western District of Michigan, Southern Division against Defendant Overdrive, Inc.for the amount of $74,500.00 plus costs and reasonable attorney fees.  The $74,500.00 (out of a maximum award of $100,000) award against Overdrive, Inc. was for statutory damages under the ACPA.  The total award, with attorney fees, could exceed $200,000.  Further, Overdrive, Inc., was ordered to transfer the domain name “forwardreviews.com” (a typographical variation of Plaintiff’s trademark protected domain forewordreviews.com) to Plaintiff.  This cyber-squatting and cyber-piracy judgment against Overdrive, Inc., is one of the largest jury awards for trademark infringement on a domain name under the Anti-Cybersquatting Consumer Protection Act (ACPA) 15 USC § 1125(d)(m).

Overdrive inc

Case Name:  ForeWord Magazine, Inc. v Overdrive, Inc., United States District Court, Western District of Michigan, Southern Division, No. 1:10-cv-01144. The case is on appeal as of March 2013.

Representing OverDrive, Inc.:  Lester S. Potash – Attorney.

Company Representatives For Overdrive, Inc. Steven Potash (CEO) and Mike Vantusko (CFO).

OverDrive is funded by Insight Venture Partners, a private-equity firm that focuses on technology companies.  Overdrive’s key products and services:   OverDrive Media Console, OverDrive Read, OverDrive Media Station, Content Reserve.

BACKGROUND of ACPA

Online extortion comes in many forms and occurs all too often on the internet.  Whether it is people extorting companies by registering and using company names, typographical variations of company names or misdirecting Internet traffic to competing websites, cyber-squatting or cyber-extortion remains a serious problem.  As noted by Spencer Abraham, one of the sponsors of the ACPA:

On-line extortion in any form is unacceptable and outrageous. Whether it's people extorting companies by registering company names, misdirecting Internet users to inappropriate sites, or otherwise attempting to damage a trademark that a business has spent decades building into a recognizable brand, anyone engaging in cyber-squatting activity should be held accountable for their actions.

 As noted in Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 946 (9th Cir. 2002), "Cybersquatting is the Internet version of an unlawful land grab. Cybersquatters register well-known brand names as Internet domain names in order to force the rightful owners of the marks to come forward and pay for the right to engage in electronic commerce under their own name."

UPDATE June 20, 2013: "The matter has been resolved by agreement of the parties and the appeal dismissed. The matter is now closed.

BACKGROUND OF LAWSUIT AGAINST DEFENDANT OVERDRIVE, INC.

Plaintiff provides book-review services and produces a magazine. Plaintiff owns the registered trademark “FORE WORD” and owner of the common-law trademark “FOREWORD REVIEWS” and the Internet domain name “forewordreviews.com.” Since March of 2001, Plaintiff has consistently used its mark and the related domain name as an indicator of a source for its magazine and book review services.

Defendant OverDrive, Inc. www.overdrive.com creates and provides software and services related to electronic books e-books to consumers while maintaining security and digital-rights management. It also allows consumers to retrieve and access those e-books. (“e-books”). Its products and services allow publishers, libraries, schools, and retailers to deliver e-books to consumers while maintaining security and digital-rights management. Defendant Overdrive was represented by Chief Financial Officer Michael Vantusko and OverDrive’s CEO, Steven Potash, were the primary management involved in OverDrive's defense, although Mr. Potash did not appear for trial despite representations to the jury he would appear.

In April 2001, Plaintiff and OverDrive's CEO Steven Potash entered into an agreement to jointly “create an electronic marketplace for the development, distribution, and sale of on-line professional book reviews.” In anticipation of this agreement, OverDrive registered the domain name “forewordreviews.com". To head off consumer confusion from misspellings, OverDrive also registered a confusingly similar domain name, “forwardreviews.com.”

In early 2006, the parties terminated their joint venture. Under the terms of the Settlement Agreement, OverDrive released any interest in Plaintiff’s trademark and agreed to transfer the “forewordreviews.com” domain name to Plaintiff.

In July 2010, a newly hired employee at Plaintiff accidentally typed the misspelled domain name into his web browser and reached OverDrive’s site. After learning of this, Plaintiff contacted OverDrive to discuss the domain name. Plaintiff followed up on August 2, 2010 with a letter to Mr. Potash, asking OverDrive to transfer the domain name to Plaintiff. In response, OverDrive’s Chief Financial Officer, Michael Vantusko, called Plaintiff on August 6, 2010, to discuss the issue, but the parties were not able to settle their dispute. 

OverDrive’s Chief Financial Officer Michael Vantusko, and OverDrive’s CEO, Steven Potash redirected traffic from the infringing domain name to their own website www.overdrive.com and later demanded substantial sums from Plaintiff for the domain.  Thereafter, Overdrive demanded a donation to the Cleveland Public Library www.cpl.org/ as compensation for the infringing domain name.

In this case, Plaintiff brought three claims against Defendant OverDrive, Inc. (“OverDrive”): (1) cybersquatting and cyberpiracy, under 15 U.S.C. § 1125(d); (2) unfair competition, under Mich. Comp. Laws §§ 445.901 et seq.; and (3) breach of contract, under Michigan common law. On summary judgment, the court found OverDrive liable under count I, and at trial, a jury apportioned damages of $74,500 under that claim.  The jury also found OverDrive liable for nominal damages and attorneys’ fees under the breach-of-contract claim (count III).

In granting Summary Judgment on Plaintiff’s claim of cybersquatting, the court noted:


“Considering the statutory factors in light of the totality of the facts and the inferences from them read most favorably to OverDrive, the inescapable conclusion is that OverDrive acted in bad faith. It registered the domain name for purposes of its joint venture with Plaintiff, not only knowing that “forwardreviews.com” would be confused with “forewordreviews.com,” but because of that potential confusion. Since the joint venture broke up, OverDrive has never used the domain name for legitimate business; indeed, for much of this time, the domain name has essentially lain dormant. OverDrive has not tried to justify its later decision to re-route visitors to its own site, and even though the two companies provide somewhat different products and services, the overlap between them clearly evidences an attempt to increase OverDrive’s own business using unwitting, potential Plaintiff customers. OverDrive’s later decision to spite Plaintiff by re-routing visitors to forward.com also demonstrates an intent to confuse Plaintiff’s potential customers by linking the book-review company to a Jewish daily newspaper. OverDrive’s refusal to simply give the domain name to Plaintiff in exchange for its registration costs, even though it had no real connection to and no legitimate use for the domain name, further smacks of bad faith. Finally, OverDrive’s undisputed counter-offer, to transfer the domain name in exchange for a $2,500 donation to a charity associated with its CEO, is an obvious attempt to squeeze some—any—benefit out of Plaintiff, despite OverDrive’s almost total lack of interest in keeping the domain name and using it legitimately.”


The court found that OverDrive refused to return the domain name not out of any legitimate business purpose, nor based on any reasonable legal arguments that it was not in fact violating the law. Instead, it refused, opposing Plaintiff at every turn. Even after summary judgment was granted against it, and jury returned a verdict against Overdrive, Overdrive still refused to return the infringing domain name further supporting the Court’s finding of ‘exceptional circumstances” and the willful and deliberate trademark infringement in awarding attorney fees as part of damages against Overdrive.

As noted in Utah Lighthouse Ministry, No. 07-4095 (10th Cir., May 29, 2008), "The quintessential example of a bad faith intent to profit is when a defendant purchases a domain name very similar to the trademark and then offers to sell the name to the trademark owner at an extortionate price." 

Overdrive, Inc. continues to fight, taking the adverse cybersquatting judgment on appeal to the Sixth Circuit court of appeals.

UPDATE June 20, 2013: "The matter has been resolved by agreement of the parties and the appeal dismissed. The matter is now closed.

 

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