DECISION

COTTONSMITH LLC v. Resource Services Ltd.

Claim Number: FA0104000097096

PARTIES

The Complainant is COTTONSMITH LLC, Los Angeles, CA, USA (“Complainant”) represented by Linda Kohler, of Big Dogs Legal Dept.  The Respondent is Resource Services Ltd., Costa Mesa, CA, USA (“Respondent”) represented by Stephen H. Sturgeon.

REGISTRAR AND DISPUTED DOMAIN NAME 

The domain name at issue is "cottonsmith.com", registered with Network Solutions, Inc.

PANEL

The undersigned certifies that he has acted independently and impartially and to the best of his knowledge, has no known conflict in serving as Panelist in this proceeding.

Judge Irving H. Perluss (Retired) is the Panelist.

PROCEDURAL HISTORY

Complainant submitted a Complaint to the National Arbitration Forum (“the Forum”) electronically on April 23, 2001; the Forum received a hard copy of the Complaint on April 24, 2001.

On April 25, 2001, Network Solutions, Inc. confirmed by e-mail to the Forum that the domain name "cottonsmith.com" is registered with Network Solutions, Inc. and that the Respondent is the current registrant of the name.  The name was registered on August 5, 1999. Network Solutions, Inc. has verified that Respondent is bound by the Network Solutions, Inc. 5.0 registration agreement and has thereby agreed to resolve domain-name disputes brought by third parties in accordance with ICANN’s Uniform Domain Name Dispute Resolution Policy (the “Policy”).

On May 2, 2001, a Notification of Complaint and Commencement of Administrative Proceeding (the “Commencement Notification”), setting a deadline of May 22, 2001 by which Respondent could file a Response to the Complaint, was transmitted to Respondent via e-mail, post and fax, to all entities and persons listed on Respondent’s registration as technical, administrative and billing contacts, and to postmaster@cottonsmith.com by e-mail.

A timely response was received and determined to be complete on May 22, 2001.  Complainant made an untimely additional submission, which was considered by the Panelist.

On May 24, 2001, pursuant to Complainant’s request to have the dispute decided by a single-member Panel, the Forum appointed Judge Irving H. Perluss (Retired) as Panelist.

RELIEF SOUGHT

The Complainant requests that the domain name be transferred from the Respondent to the Complainant.

PARTIES’ CONTENTIONS

A. Complainant

1. The disputed domain name is identical and/or is confusingly similar to its common law COTTONSMITH mark.

2. Complainant has established its common law rights in the mark because it has used the mark for years, and it has considerable industry recognition.  Moreover, Complainant has a trademark registration pending in the United States Patent and Trademark Office showing first use in commerce was February 1, 1994.

3. Respondent has no rights or legitimate interest in the disputed domain name because it is not commonly known by the name, and it has made no bona fide commercial or fair use of the name.

4. Respondent registered the disputed domain name in bad faith for it intended to confuse customers, to block a competitor from registering its trademark as a domain name, and to extract compensation from Complainant for the release of the domain name.

B. Respondent

1. Complainant does not have any registered or common law rights in the alleged COTTONSMITH mark.

2. Respondent intends to use and has made demonstrable preparations to use the disputed domain name in connection with his cotton products, and he has used the Cottonsmith name since 1998.

3. Respondent denies that he registered the domain name in bad faith.  He did not intend to disrupt Complainant’s business, nor did he offer the disputed domain name for sale to Complainant.

DISCUSSION, FINDINGS AND DETERMINATIONS

Paragraph 15(a) of the Rules for Uniform Domain Name Dispute Resolution Policy (the “Rules”) instructs this Panel to “decide a complaint on the basis of the statements and documents submitted in accordance with the Policy, these Rules and any rules and principles of law that it deems applicable.”

Paragraph 4(a) of the Policy requires that the Complainant must prove each of the following three elements to obtain an order that a domain name should be cancelled or transferred:

(1) the domain name registered by the Respondent is identical or confusingly similar to a trademark or service mark in which the Complainant has rights;

(2) the Respondent has no rights or legitimate interests in respect of the domain name; and

(3) the domain name has been registered and is being used in bad faith.

It is difficult to resolve factual issues only from a written record.  If the contentions of Complainant were undisputed, clearly it would prevail.  Complainant’s contentions, however, are disputed, requiring an analysis of the evidence presented and the application of the burden of proof, which rests with Complainant, as above indicated.

Identical and/or Confusingly Similar

Complainant contends that the “cottonsmith.com” domain name is identical to its common law COTTONSMITH mark.[1]  See Amherst v. IFC Corp., FA 96768 (Nat. Arb. Forum Apr. 3, 2001) (finding that Respondent’s domain name <customcommerce.com> is identical to Complainant’s CUSTOM COMMERCE trademark registration).

Complainant attempts to prove its common law rights in the mark through its use of the mark and industry-wide recognition in connection with the mark.  See Passion Group Inc. v. Usearch, Inc., AF-0250 (eResolution Aug. 10, 2000) (finding that Complainant established sufficient rights by virtue of its distribution and advertising to enable it, at common law, to prevent another magazine by the same name from being passed off as that of Complainant).  Thus, Complainant established that it “has rights” under the ICANN Policy).

The difficulty is that Respondent has submitted affidavits from the owner of Respondent (Attachment B to the Response), the owner of World Source, an imported apparel agency service (Attachment C to the Response), and an employee of a customer of Respondent (undesignated) all of which state:

I am very familiar with the business activities of Complainant since it is in the same industry.  I have never heard or known of Complainant’s use of the word Cottonsmith.  Any use of the word must be on a very limited basis.

In rebuttal, Complainant has submitted additional material.  Exhibit A is an invoice from Cottonsmith, Incorporated, of Alphareta, Georgia, dated January 9, 1994.  Exhibit B is an invoice from Cottonsmith, Inc., of Alpharetta, Georgia, dated March 1, 1994.  Exhibit C is an invoice dated January 20, 1995, stating that a check should be made payable to Cottonsmith, Incorporated, Commerce, California.  Exhibit D is an affidavit from Fred Kayne who states he was one of the founding partners of the apparel company COTTONSMITH and the name and service mark have been used since January 1994.  Exhibit E is an affidavit from the operations manager of a customer of COTTONSMITH, which states that her employer became a customer in March 1994.

Not only are we confronted with flat contradictions, but there are additional problems.

The records of the California Secretary of State indicate that Cottonsmith, Incorporated, of Commerce, California, presently is an active foreign corporation incorporated on July 26, 1995.

But Cottonsmith, Incorporated, is not the Complainant here. Cottonsmith LLC of Vernon, California, an active limited liability company, incorporated on July 18, 2000, is the Complainant.

We have no evidence of the sale or transfer of the claimed common law mark from Cottonsmith, Incorporated, to Cottonsmith, LLC.

It now must be observed that Complainant has a pending service mark registration (filing date January 30, 2001 and first used in commerce February 1, 1994) for the COTTONSMITH service mark.  (Exhibit D to the Complaint).[2]  See Phone-N-Phone Services (Bermuda) Ltd. v. Shlomi (Salomon) Levi, D2000-0040 (WIPO Mar. 23, 2000) (finding that the domain name was identical or confusingly similar to the complainant’s pending service mark application).  But see Warnervision Entertainment, Inc. v. Emprire of Carolina, Inc., 919 F.Supp. 717, 772 (S.D.N.Y. 1996) to the contrary (finding no trademark rights accrue to either a pending trademark application or an approved “intent to use” application).

Despite the contradictions and unexplained confusion, the Panel finds and concludes that Complainant does have a common law right to the service mark COTTONSMITH, and that the mark is identical and confusingly similar to the disputed domain name.

Rights or Legitimate Interests

Paragraph 4(c) of the Policy informs a Respondent that, without limitation, the following actions will demonstrate his rights or legitimate interests to the disputed domain name:

(i) before any notice to you of the dispute, your use of, or demonstrable preparations to use, the domain name or a name corresponding to the domain name in connection with a bona fide offering of goods or services; or

(ii) you (as an individual, business, or other organization) have been commonly known by the domain name, even if you have acquired no trademark or service mark rights; or

(iii) you are making a legitimate noncommercial or fair use of the domain name, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service mark at issue.

The Panel finds and concludes that Respondent has not satisfied subparagraphs (ii) or (iii), above.

Respondent, however, claims that since 1998 he has satisfied subparagraph (i) in that he has made demonstrable preparations to use the domain name in connection with a bona fide offering of goods or services.  He supports his claim by his affidavit (Attachment 3 to the Response) and it is confirmed by the affidavit of the owner of World Service, an active website (Attachment C to the Response) as follows:

As part of the development of the Cottonsmith line of business, I worked with Ramu Pandit, the owner of World Source in the preparation of a website during the period 1997 to February of 1998.  The website can currently be viewed at www.worldsourceUSA.com.  The plan has been to test the effectiveness of the website with World Source products and, after refinements, to use the website on the domain COTTONSMITH.COM and to use the business name COTTONSMITH on the website.  The purpose of the website is to promote and to sell services of the importation and production as well as to provide a way to advertise and receive inquiries from overseas manufacturers.

Complainant has sought to refute this claim by affidavits (Exhibits D and E of Complainant’s additional submissions), which recite:

On information and belief, Mr. Nager is not using the domain for any business purpose.  Mr. Nager is merely holding up the registration to prevent COTTONSMITH from using it to develop an internet website to service it’s customers on a broader scale.

The difficulty here is that an affidavit “on information and belief” is worthless.

In Star Motor Imports, Inc. v. Superior Court (1979) 88 Cal.App.3d 201, 204, 151 Cal.Rptr. 721, the general rule was stated as follows:

An affidavit based on ‘information and belief’ is hearsay and must be disregarded (Franklin v. Nat C. Goldstone Agency, 33 Cal.2d 628, 631 [204 P.2d 37]; Moore v. Thompson, 138 Cal.23, 26 [70 P. 930]; Judd v. Superior Court, 60 Cal.App.3d 38, 43 [131 Cal.Rptr. 246]; Tracy v. Tracy, 213 Cal.App2d 359, 362 [28 Cal.Rptr. 815]), and it is ‘unavailing for any purpose’ whatsoever (Gay v. Torrance, 145 Cal. 144, 151 [76 P. 717]; Ex Parte Yonetaro Fkumoto, 120 Cal. 316, 321 [52 P. 726]; Enter v. Crutcher, 159 Cal.App.2d Supp. 841, 845 [323 P.2d 586]; Bank of America v. Williams, 89 Cal.App.2d 21, 29 [200 P.2d 151]).

Thus, the Panelist is compelled to find and conclude that Respondent does have rights and a legitimate interest in the disputed domain name.  Specifically, and since 1998, before notice of the dispute, it is plausible that Respondent was making demonstrable preparations to use the domain name in connection with a bona fide business activity.  See Smart Design LLC v. Hughes, D2000-0993 (WIPO Oct. 18, 2000) (finding rights and legitimate interests in the domain name where Respondent sought to develop a bona fide business use for the domain name).

Registration and Use in Bad Faith

Nevertheless, Complainant charges that Respondent is a cybersquatter and that he has registered and used the disputed domain name in bad faith.

This is because, Complainant asserts, Respondent and its counsel have used the domain name to attempt to extract payment from Complainant.  Policy Paragraph 4b(i) states that registering a domain name primarily for the purpose of selling it for valuable consideration in excess of out of pocket costs is evidence of bad faith.  See John C. Nordt Co., Inc. v. Jewelry Exchange FA 96789 (Nat. Arb. Forum Apr. 11, 2001) (finding that Respondent exhibited bad faith when Respondent, a competitor of Complainant, attempted to sell a domain name, which was identical to Complainant’s MOTHER’S RING mark, to the Complainant for a profit).

This charge apparently is based on a letter (Exhibit C to the Complaint) from then Respondent’s counsel to counsel for Complainant stating in part:

However, Mr. Nager has advised me that you wish to resolve this matter in a ‘cooperative fashion’.  We remain willing to discuss any proposal you have including your client’s purchase of the domain name ‘Cottonsmith.Com’.

Professor McCarthy in Trademarks and Unfair Competition (Updated 2000) Section 2.5:78, p. 25-243, cites to the House Judiciary Committee Report on H.R. 3028, H.R. Rep. No. 106-412 p. 12 (October 25, 1999); Senate Section-by-Section Analysis, Congressional Record, p. S14714 (November 17, 1999), with respect to per se cybersquatting as follows:

[This factor] does not suggest that a court should consider the mere offer to sell a domain name to a mark owner or the failure to use a name in the bona fide offering of goods or services as sufficient to indicate bad faith.  Indeed, there are cases in which a person registers a name in anticipation of a business venture that simply never pans out.  And someone who has a legitimate registration of a domain name that mirrors someone else’s domain name, such as a trademark owner that is a lawful concurrent user of that name with another trademark owner, may, in fact, wish to sell that name to the other trademark owner.  This bill does not imply that these facts are an indication of bad-faith.

In any event, it is to be noted that Policy Paragraph 4(b)(i) requires a “pattern,” and there is no evidence of such conduct here.

It is found and concluded that Respondent did not register or use the disputed domain name in bad faith.

DECISION

This has been a difficult matter to decide.  In the last analysis, the Panel has determined the Complainant has not carried its required burden of proof.

Based on the above findings and conclusions, it is decided that the claim of Complainant to the domain name “cottonsmith.com” be and the same is denied.

Honorable Irving H. Perluss (Ret), Panelist

Dated:   June 7, 2001

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