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Interstate Net Bank v. Netb@nk

September 16, 2002

INTERSTATE NET BANK, PLAINTIFF,
v.
NETB@NK, INC. AND NETB@NK, DEFENDANTS.



The opinion of the court was delivered by: Honorable Jerome B. Simandle

OPINION

This matter comes before the Court upon motion by plaintiff interState Net Bank for summary judgment against defendants NETB@NK, INC., and NETB@NK (now known as NetBank, Inc., and NetBank, respectively, and referred to collectively herein as "Defendants").

Plaintiff filed the underlying action on March 20, 2001, seeking a declaratory judgment that the term NETBANK (the federal registration of which had been acquired by defendants) is generic and merely descriptive, that plaintiff's use is not likely to cause confusion, and that defendant's trademark registration should be canceled. Defendants have asserted counterclaims for trademark infringement, false designation of origin, false advertising, trademark dilution, and cyber piracy under the Lanham Act; declaratory judgment; and trademark infringement, trademark dilution, and unfair competition under New Jersey law.

On April 12, 2002, plaintiff filed this motion for summary judgment, arguing that the term NETBANK is generic either for the services identified in the registration - online bill payment - or for the broader area of online banking and financial services, and therefore that defendant is neither entitled to incontestible registration nor trademark protection. Plaintiff also seeks attorney's fees under the Lanham Act. On June 10, 2002, this Court heard oral argument on the motion. For the reasons discussed below, plaintiff's motion for summary judgment will be granted.

BACKGROUND

This case involves the issue of whether defendants' use of the term NETBANK is a generic use and therefore not protectable under the trademark laws. Plaintiff and defendants are among a growing number of internet banks offering their services to customers primarily or exclusively over the internet. On July 13, 1994, Software Agents, Inc., a company unrelated to defendants, filed an application to register NETBANK as a service mark to the United States Patent and Trademark Office ("PTO"), claiming date of first use in commerce of May 26, 1994. (Shay Cert. Ex. A.) In its application, Software Agents had described its services as an "automated payment service which allows exchange of payment coupons via electronic mail." (Shay Cert. ¶ 2 & Ex. A.) On August 22, 1995, the PTO granted Software Agents's application for registration of the service mark NETBANK, Registration No. 1,913,750. (Id.) The NETBANK mark was registered by the PTO to be used for the following purpose: "electronic payment services featuring a system of electronic money coupons that are exchanged by means of an on-line computer service, in class 36." (Id.)

Defendant Net.B@nk, Inc., originally began as Internet Organizing Group, Inc., in October 1996, as a provider of online bill payment services and online statement services for Atlanta Internet Bank, which operated as a division of Carolina First Corporation. (Stokes Decl. ¶ 3.) Internet Organizing Group formally changed its name to Net.B@nk, Inc., in November 1996. (Id.) In spring of 1997, Net.B@nk, Inc., acquired a charter for a federal savings bank and assumed control of operations of Atlanta Internet Bank ("AIB") from Carolina First, and continued to provide online bill payment services for AIB. (Id. ¶ 4.) A year later, in 1998, Net.B@nk, Inc., contacted Software Agents, which owned the service mark registration for NETBANK and the domain name "netbank.com." (Id. ¶ 5.)

On April 9, 1998, Net.B@nk, Inc., acquired the service mark registration for NETBANK and all associated goodwill from Software Agents. (Id. ¶ 5.) In July 1998, Net.B@nk, Inc., changed the name of its bank from Atlanta Internet Bank to Net.B@nk, consistent with the corporate name as well as its "full line of banking services." (Id. ¶ 6.) Net.B@nk, Inc. and Net.B@nk thus provided both online bill payment services and broader banking and financial services under the NETBANK mark. (Id. ¶ 7.)

On July 31, 1998, Net.B@nk filed three "Intent to Use" applications to the PTO to register Net.B@nk as a service mark for "providing retail banking services over the internet." (Shay Cert. ¶ 7 & Ex. F.) In August 1999, the PTO refused registration of the mark on the ground that the mark was confusingly similar to the NETBANK mark, Registration No. 1,913,750, previously registered by Software Agents, Inc., and subsequently assigned to the applicant. (Id.) Because there was also a prior pending application for the term NET BANKING, the application was suspended pending disposition of the other application. (Id.) The PTO subsequently issued a final refusal to register NET BANKING, and the application was abandoned. (Shay Cert. ¶ 8 & Ex. G.)

On August 22, 2000, NetB@nk, Inc., filed a Combined Declaration of Use and Incontestibility for the original NETBANK registration acquired from Software Agents, Inc., in April 1998, which was accepted by the PTO in 2000. (Shay Cert. ¶ 2 & Ex. A; Defs.' Statement of Material Facts, ¶ 2.) In support of their incontestibility, defendants submitted printouts from their website showing NetBank's "Online Bill Payment and Presentment" Sservice. (Shay Cert. Ex. A; Defs.' Statement of Material Facts, ¶ 3.) Defendants stated in their declaration that "[t]he owner has used the mark in commerce for five (5) consecutive years after the date of registration . . . and is still using the mark in commerce on or in connection with all goods and/or services listed in the existing registration." (Id.)

Defendants formally changed their names to NetBank, Inc. and NetBank in 2000, due to the practical difficulties in using the "dot" and the at symbols. (Stokes Decl. ¶ 7.) On or about December 4, 2000, NetBank, Inc. withdrew its application for trademark registration for the mark Net.B@nk to the PTO. (Shay Cert. ¶ 7 & Ex. F.) On December 5, 2000, NetBank, Inc. filed an application to register the term NETBANK NETWORTH INVESTMENT ACCOUNT for "providing comprehensive banking and investment brokerage services over a global computer network." (Shay Cert. ¶ 9 & Ex. H.) On June 28, 2001, the PTO refused to register the mark, noting:

The applicant must disclaim the descriptive wording "NETBANK" and "INVESTMENT ACCOUNT" apart from the mark shown. . . . The wording is merely descriptive because it describes the method of delivering the services (NETBANK) and a feature of the services (INVESTMENT ACCOUNT). (Shay Cert. ¶ 9 & Ex. H.)

On March 15, 2001, plaintiff interState Net Bank received its banking charter from the State of New Jersey and began operations in June 2001, conducting a portion of its business over the internet through its website interstatenetbank.com. Plaintiff filed two "Intent to Use" applications in late 1999 and early 2000 for the mark INTERSTATE NET BANK for "banking services provided via the global computer network," and applied for a New Jersey State Banking Charter for INTERSTATE NET BANK in July 2000. On September 8, 2000, defendants served plaintiff a cease and desist letter regarding its use of INTERSTATE NET BANK or "any other moniker confusingly similar to the NETBANK marks . . . ." (Grout Letter, Shay Cert. ¶ 11 & Ex. J.) By letter dated September 18, 2000, plaintiff refused to accede to defendants' demands. (Fall Letter, Shay Cert. ¶ 12 & Ex. K.) In a letter dated November 2, 2000, defendants threatened to bring suit against plaintiff. (Grout Letter, Shay Cert. ¶ 13 & Ex. L.)

On March 20, 2001, plaintiff filed this action seeking a declaratory judgment that NETBANK is generic and merely descriptive, that plaintiff's use is not likely to cause confusion, and that defendant's trademark registration should be cancelled. (Compl. ¶¶ 21- 27.) On August 1, 2001, defendant submitted its answer and counterclaims alleging trademark infringement, false designation of origin, false advertising, trademark dilution, and cyberpiracy under the Lanham Act; declaratory judgment; and trademark infringement, trademark dilution, and unfair competition under New Jersey law. (Answer & Counterclaims, ¶¶ 32-124.) Pursuant to the Scheduling Order of September 24, 2001, all discovery was complete before plaintiff filed this summary judgment motion asserting that the term NETBANK is generic on April 12, 2002.

DISCUSSION

I. Plaintiff's Motion for Summary Judgment

Plaintiff maintains that the term NETBANK *fn1 is generic and should be given no protection under the trademark laws. Defendants argue, however, that this determination cannot be decided on a summary judgment motion. "Whether or not a particular trademark is generic is a question of fact." Salton Inc. v. Cornwall Corp., 477 F. Supp. 975, 986 (D.N.J. 1979) (citation omitted). In approaching the determination of genericness, "as with any question of fact [it] can be resolved on summary judgment if the evidence is so one-sided that there can be no doubt about how the question should be answered." Door Sys., Inc. v. Pro-Line Door Sys., Inc., 83 F.3d 169, 171 (7th Cir. 1996) (Posner, C.J.) (citing Bath & Body Works, Inc. v. Luzier Personalized Cosmetics, Inc., 76 F.3d 743, 748 (6th Cir. 1996); Boston Beer Co. v. Slesar Bros. Brewing Co., 9 F.3d 175, 180 (1st Cir. 1993)); see, e.g., America Online, Inc. v. AT&T Corp., 243 F.3d 812, 818-23 (4th Cir.) (affirming district court's summary judgment finding of genericness as to "You Have Mail" and "IM," but reversing as to "Buddy List"), cert. dismissed, 122 S. Ct. 388 (2001); Liquid Controls Corp. v. Liquid Control Corp., 802 F.2d 934, 938-41 (7th Cir. 1986) (affirming district court's summary judgment finding that term "liquid controls" is generic); Filipino Yellow Pages, Inc. v. Asian Journal Publ'ns, Inc., 198 F.3d 1143, 1150- 52 (9th Cir. 1999) (affirming district court's summary judgment finding that "Filipinio Yellow Pages" is generic); Convenient Food Mart, Inc. v. 6-Twelve Convenient Mart, Inc., 690 F. Supp. 1457, 1461 (D. Md. 1988) ("[T]he genericness issue is ripe for resolution on summary judgment despite the lack of survey evidence."), aff'd, 870 F.2d 654 (4th Cir. 1989). Thus, if the undisputed facts show that there is no genuine issue as to any material fact regarding the genericness of the mark, this Court may appropriately decide such a question on summary judgment.

A. Whether the NETBANK Mark is Generic

Plaintiff argues that the term NETBANK is generic and as such is incapable of trademark protection, and seeks to have defendant's registration of the term canceled, *fn2 as well as an award of attorneys' fees. Courts have recognized four different categories of terms with respect to trademark protection: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful. See A.J. Canfield Co. v. Honickman, 808 F.2d 291, 297 (3d Cir. 1986) (citation omitted); Filipino Yellow Pages, supra, 198 F.3d at 1146-47 (citing Surgicenters of America, Inc. v. Med. Dental Surgeries Co., 601 F.2d 1011, 1014 (9th Cir. 1979)). A generic or common descriptive term can never function as a trademark, and merely specifies the genus of which the particular product is a species. See Liquid Controls, supra, 802 F.2d at 935-36 (affirming district court's finding that "liquid controls" is a generic term) (citations omitted); see also In re Merrill Lynch, Pierce, Fenner & Smith, Inc., 828 F.2d 1567, 1569 (Fed. Cir. 1987) ("Generic terms, by definition incapable of indicating source, are the antithesis of trademarks, and can never attain trademark status."); Filipino Yellow Pages, 198 F.3d at 1147 (a generic term "cannot become a trademark under any circumstances"). A generic term is never protectable because "even complete `success . . . in securing public identification . . . cannot deprive competing manufacturers of the product of the right to call an article by its name.'" Canfield, 808 F.2d at 297 (citing Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976)).

Defendants in turn rely on their acquisition of the federal trademark registration of the term NETBANK, which it obtained from Software Agents on April 9, 1998. If a party has a federal trademark registration, it constitutes a strong presumption that the term is not generic or descriptive. See 15 U.S.C. § 1115(a); see also Liquid Controls, 802 F.2d at 936; Horizon Mills Corp. v. QVC, Inc., 161 F. Supp. 2d 208, 214 (S.D.N.Y. 2001). The Lanham Act provides:

[A] mark registered on the principal register . . . shall be prima facie evidence of registrant's exclusive right to use the registered mark in commerce on the goods or services specified in the registration subject to any conditions or limitations stated therein, but shall not preclude an opposing party from proving any legal or equitable defense or defect which might have been asserted if such mark had not been registered. 15 U.S.C. § 1115(a) (emphasis added).

The "registration constitutes prima facie evidence of a protected interest with respect to the goods specified in the registration only." Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1354 (9th Cir. 1985) (en banc) (emphasis added); see also Novartis Consumer Health, Inc. v. McNeil-PPC, Inc., 53 U.S.P.Q.2d 1406, 1409 (D.N.J. 1999) (quoting 15 U.S.C. ยง 1057(b)). This presumption may be overcome by proof of descriptiveness or by proof of genericness, and the burden is on the opposing party, here the plaintiff, to overcome the presumption. Liquid ...


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