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HERTZ CORPORATION v. GATOR CORPORATION

March 13, 2003

THE HERTZ CORPORATION, PLAINTIFF
v.
THE GATOR CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Bassler, District Judge.

OPINION

The defendant The Gator Corporation ("TGC") seeks a stay of the proceedings in this action, including plaintiff Hertz Corporation's ("Hertz") earlier-filed motion for a preliminary injunction against TGC, until the Judicial Panel on Multidistrict Litigation ("MDL Panel") hears and decides TGC's motion for consolidation of several suits involving similar issues. At a February 17, 2003 telephonic status conference, the Court decided to hear TGC's stay motion before Hertz's preliminary injunction motion. Having held oral argument on March 10, 2003 and considered the parties' briefs, the Court grants TGC's motion to stay.

I. Factual & Procedural Background

This short discussion of the facts, though providing background for the Court's analysis of this motion, does not constitute the Court's findings of fact for any purpose other than this motion.

The Gator Corporation operates a software-based advertising network called the "Gator Advertising and Information Network" or the "GAIN Network" ("the Network"). (Corcoran Decl. ¶ 3.) The GAIN network relies upon a program that TGC offers directly to computer users or bundles with software otherwise acquired by computer users. (Id., Ex. 8 ¶¶ 3-4.) Through the GAIN Network, TGC "observes" the online behavior of computer users who have the requisite program. That is, the program sends to TGC information about which website the user has visited, and TGC then uses this information to target advertisements to the user. Through the Network, TGC causes advertisements tailored to the website visited by the user to "pop-up" in separate windows on the user's computer screen. TGC's clients hire it precisely for this purpose — to target advertisements to visitors of particular websites or types of websites. (TGC Support Brief at 8.)

So when computer users with the GAIN Network program visit "hertz.com", TGC learns through the Network that those users have visited the Hertz site and causes to "pop-up" advertisements that TGC thinks of interest to potential Hertz customers, including, for example, ads from travel companies, hotels, financial services companies, and even other car companies.

Hertz alleges that the process by which TGC "observes" users visiting the Hertz website involves the misappropriation of the Hertz trademark and other violations of intellectual property law. Hertz's complaint, filed against TGC on January 31, 2003, includes seven counts: (I) unauthorized trademark use, (II) false designation of origin, (III)copyright infringement, (IV) contributory copyright infringement, (V) tortious interference, (VI) trespass, and (VII) computer trespass. (Complaint ¶¶ 54-77.) Hertz's motion for a preliminary injunction, filed the same day as the complaint, relies only upon the misappropriation theory of Count I. Hertz asks the Court to issue a preliminary injunction against TGC precluding it from using the Hertz mark in its GAIN Network. That is, Hertz argues that TGC's using the Hertz mark to trigger the "pop-up" advertisements violates § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1)(a).

Prior to Hertz's filing its complaint against TGC, other businesses whose websites TGC similarly targeted through its GAIN Network sued TGC. Five of those actions are currently pending in multiple federal district courts, as are five actions for declaratory relief brought by TGC itself. Two actions have been settled.*fn1 Also pending are four cases involving WhenU, TGC's nearest software publishing competitor, that raise similar issues.

TGC filed a motion pursuant to 28 U.S.C. § 1407 before the MDL Panel on December 31, 2002 requesting consolidation in the Northern District of California of all pending actions related to the GAIN Network. The MDL Panel will hear argument of the motion on March 27, 2003, and a decision can be expected approximately four to six weeks after argument.

Because Hertz filed its complaint after TGC filed the consolidation motion, this action is not part of the original MDL motion. By Notice dated February 25, 2003, however, TGC designated this action a "tag-along" case before the MDL Panel pursuant to JPML Rules 7.2 and 7.5(d) & (e) because this action involves common questions of fact and of law with the other actions under consideration by the Panel. Having requested consolidation of the GAIN Network actions, TGC asks the Court to stay all proceedings, including consideration of Hertz's motion for preliminary injunction, pending an MDL Panel decision on the motion for consolidation.

II. Discussion

The issues presented on TGC's motion to stay are whether the Court may stay the motion for preliminary injunction and, if so, whether staying these proceedings is appropriate under the applicable standards that guide the Court in the exercise of its discretion. The Court addresses these issues seriatim.

A. Propriety of the Court's Issuing a Stay of Hertz's Preliminary Injunction Motion Pending the ...

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