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Media Alerts - Verisign, Inc. v. LLC, et al. -- Fourth Circuit
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March 14, 2017
  Verisign, Inc. v. LLC, et al. -- Fourth Circuit
Dueling Domain Operator Falls Short of Proving Lanham Act Claim

Areas of Law: Lanham Act

Issue Presented: Whether the appellees violated the Lanham Act's prohibition against false advertising by promoting their product as "the next .com" and by criticizing their competitor's product through subjective language.

Brief Summary: In a published opinion, the United States Court of Appeals for the Fourth Circuit affirmed the District Court's award of summary judgment to appellees, LLC and Daniel Negari in a false advertising action brought by Verisign, Inc. under the Lanham Act.

Extended Summary: This case arose out of a false advertising action under the Lanham Act. Appellant Verisign, Inc. ("Verisign") is the exclusive operator of .com. and .net top-level domains. In 2014, after the Internet Corporation for Assigned Names and Numbers ("ICANN") approved the introduction of new top-level domains into the market, appellee, LLC ("XYZ") launched the .xyz domain. To promote the domain, XYZ and its CEO Daniel Negari ("Negari") made statements within two broad categories. First, XYZ made self-promotional statements about its registration numbers and popularity, including that XYZ secured over one million registrations and that .xyz was "the next .com." Second, XYZ made allegedly disparaging statements about Verisign's .com domain by declaring that it is "impossible to find the domain name that you want" and that "[a]ll of the good real estate is taken" except for "only . . . something with a dash or maybe three dashes and a couple numbers in it."

Verisign filed suit against XYZ and Negari alleging that appellees' statements violated the Lanham Act. To prevail on a false advertising claim under the Lanham Act, a plaintiff must show: (1) the defendant made a false or misleading representation of fact in a commercial advertisement; (2) the misrepresentation is material and likely to influence a consumer's decision; (3) the misrepresentation deceives or tends to deceive a substantial portion of the audience; (4) the defendant placed the misrepresentation in interstate commerce; and (5) the plaintiff suffered or is likely to suffer an injury by diversion of sales or lessening of goodwill.

Verisign contended that XYZ misrepresented actual consumer demand for the .xyz domain through its self-promotional statements and that XYZ made falsely disparaging statements about the .com domain. To support its claim, Verisign conducted a survey to test consumers' reactions to XYZ's statements. Verisign argued that it suffered approximately $527,000 in lost profits due to diverted sales, relying on an expert's testimony that she multiplied Verisign's lost profits by XYZ's market share at the time of the challenged statements. The District Court granted summary judgment to XYZ and Negari.

On appeal, the Fourth Circuit affirmed the District Court's judgment on the basis that Verisign failed to demonstrate that appellees' statements violated the Lanham Act. With respect to XYZ's self-promotional statements, the Fourth Circuit concluded that Verisign failed to prove that it suffered an injury caused by the challenged statements. Verisign's expert testimony proved only a temporal link between XYZ's statements and Verisign's lost profits, rather than the causal link required by the Lanham Act.

Turning to XYZ's allegedly disparaging statements, the Fourth Circuit held that the challenged statements did not constitute false or misleading factual statements, as required by the first element of a Lanham Act claim. Citing the Eighth Circuit's decision in American Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387 (8th Cir. 2004), the Fourth Circuit reasoned that XYZ's statements concerning the availability of desirable .com names constituted mere opinion or puffery and therefore did not violate the Lanham Act. Specifically, XYZ's claim that it is "impossible to find the domain name that you want" was not verifiable due to the indefinite nature of "you." The Fourth Circuit also extended its reasoning to Negari's statements that "[a]ll of the good real estate is taken" and that the "only thing that's left is something with a dash." The Fourth Circuit emphasized that "good" constituted a subjective opinion and that "only" resembled a colloquial exaggeration upon which no reasonable consumer would rely. The Fourth Circuit therefore affirmed the District Court's award of summary judgment to XYZ and Negari.

To read the full opinion, click here.

Panel: Judges Wynn, Floyd, and Harris

Argument Date: 10/27/2016

Date of Issued Opinion: 02/08/2017

Docket Numbers: No. 15-2526

Decided: Affirmed by published opinion

Case Alert Author: Linda Morris, Univ. of Maryland Carey School of Law

Counsel: ARGUED: Lisa Schiavo Blatt, ARNOLD & PORTER LLP, Washington, D.C., for Appellant. Derek Alan Newman, NEWMAN DU WORS LLP, Seattle, Washington, for Appellees. ON BRIEF: Ronald L. Johnston, Los Angeles, California, Robert N. Weiner, Robert A. DeRise, Elisabeth S. Theodore, ARNOLD & PORTER LLP, Washington, D.C., for Appellant.

Author of Opinion: Judge Harris

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 03/14/2017 10:48 AM     4th Circuit  

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