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Jacobs v. Fareportal, Inc.

United States District Court, D. Nebraska

November 21, 2018

IAN V. JACOBS, Plaintiff,
v.
FAREPORTAL, INC., Defendant.

          MEMORANDUM AND ORDER

          CHERYL R. ZWART UNITED STATES MAGISTRATE JUDGE

         This matter is before the court on Plaintiff's motion to compel and for recovery of attorneys' fees, and Defendant's response moving this court to stage liability and damages discovery under Federal Rule of Civil Procedure 26's proportionality requirement. For the reasons stated below, Plaintiff's motion at Filing No. 89 is denied and Defendant's request to stage discovery will be granted.

         INTRODUCTION

         This court is tasked with deciding whether Plaintiff's claim that discovery of 100% of Fareportal's revenue and profit data over the course of more than six years bears a reasonable relationship to Plaintiff's claimed violations, and the court must decide whether under the facts presented, staging the liability and damages phases of discovery will promote the goals enunciated in Rule 1 of the Federal Rules of Civil Procedure. Rule 1 sets the overarching standard applicable to all federal civil cases, stating the federal rules-including the discovery rules--“should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed.R.Civ.P. 1 (emphasis added).

         ANALYSIS

         Plaintiff's complaint is an action for trademark infringement under the Lanham Act (15 U.S.C. §§ 1051 et seq.), trademark infringement, unfair competition, and unjust enrichment under Nebraska common law, unfair competition under the Nebraska Consumer Protection Act (Neb. Rev. Stat. §§ 59-1601 to 59-1622), and deceptive trade practices under the Nebraska Uniform Deceptive Trade Practices Act (Neb. Rev. Stat. §§ 87-301 to 87-306). (Filing No. 1, at CM/ECF p. 1).

         Jacobs alleges that Fareportal has infringed on Jacob's trademark by incorporating Plaintiff's trademark into Defendant's advertisements and redirecting customers to Defendant's competing business. (Filing No. 1, at CM/ECF p. 1). Specifically, Jacobs alleges that: (1) Fareportal has used advertising that incorporates the phrase “We Go Cheapo, ” to deflect customers to Defendant's website and away from Plaintiff's; (2) Fareportal has purchased sponsored links for Jacobs' trademark on popular internet search engines; and (3) Fareportal has “engineered its website to artificially increase the unpaid ranking of that website” in response to consumers' “CHEAPO” searches on those search engines. (Filing No. 1, at CM/ECF p. 1).

         Defendant argues that Plaintiff is unlikely to prevail on liability, which would obviate the need for damages discovery down the road. Fareportal, therefore, argues that bifurcation of liability and damages will further the purposes of judicial economy, ensuring that party and judicial resources are expended only if necessary. Specifically, Fareportal contends that Plaintiff cannot show a likelihood of confusion between the trademarks, the Lanham Act Claims are barred by laches, Jacobs has not made consistent use of his claimed trademark, plaintiff has abandoned his trademark by failing to enforce his rights, and that bidding on or purchasing a trademark as a keyword is not tantamount to trademark infringement where the purportedly infringed mark does not appear in the resulting advertisement. (Filing No. 97).

         Defendant further contends that Plaintiff's discovery requests are disproportionate because they seek information outside the ambit of causation or relevance to the infringements alleged. Specifically, Defendant argues Plaintiff should not be entitled to the disputed information because it bears no reasonable relationship to the “We Go Cheapo” ad campaign or the keyword “Cheapo.” (Filing No. 97, at CM/ECF p. 16). Therein, Fareportal argues that Plaintiff's requests lack proportionality; Jacobs has failed to justify “[t]he enormous discrepancy between the actual damages that plaintiff may be entitled to and the profit-related information that is the subject of Plaintiff's Motion.” (Filing No. 97, at CM/ECF p. 20).

         As a preliminary matter, Fareportal moves this Court to order phased discovery, focusing the first stage solely on liability. Fareportal alleges that Jacobs is unlikely to prevail on liability, which would render the issue of damages irrelevant, and therefore argues that judicial economy militates for the bifurcation of liability and damages.

         Defendant points to significant shortcomings in Plaintiff's claims, each of which could forestall the need for damages discovery, including the current requests and expert discovery. First, Fareportal argues that Plaintiff cannot show a likelihood of confusion between the respective trademarks. (Filing No. 97, at CM/ECF p. 9). The ultimate issue in infringement claims is whether the contested mark resembles the registered mark such that its use is “likely to cause confusion, or to cause mistake, or to deceive.” SquirtCo. v. Seven-Up Co., 628 F.2d 1086, 1090 (8th Cir. 1980) (citing 15 U.S.C. §§ 1114(1), 1127). The Eighth Circuit has recognized that “resolution of this issue does not hinge on a single factor but requires a consideration of numerous factors to determine whether under all the circumstances there is a likelihood of confusion.” Id. at 1091 (internal citations omitted). These factors include: “(1) the strength of the owner's mark; (2) the similarity between the owner's mark and the alleged infringer's mark; (3) the degree to which the products compete with each other; (4) the alleged infringer's intent to ‘pass off its goods as those of the trademark owner; (5) incidents of actual confusion; and (6) the type of product, its costs and conditions of purchase.” Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC, 745 F.3d 877 (8th Cir. 2018) (internal citations omitted).

         Defendant contends that Plaintiff will be unable to show a likelihood of confusion under the Eighth Circuit framework. First, Fareportal argues that Jacob's trademark lacks conceptual and commercial strength, stating that Plaintiff “essentially abandoned the mark due to non-use, never invested in it, and never enforced it.” (Filing No. 97, at CM/ECF p. 11). Therein, Defendant argues that Plaintiff will be unable to “demonstrate ‘use' of the CHEAPO Mark during the relevant time period.” (Filing No. 97, at CM/ECF p. 13). Furthermore, Defendant states that Plaintiff's “registration of the domain name www.cheapo.com is not, by itself, a ‘commercial use' or ‘trademark use.'” (Filing No. 97, at CM/ECF p. 14).

         In addition, Fareportal claims the parties' marks are not confusingly similar and do not compete because Fareportal's trademark is stylistically distinguishable. Fareportal states it has invested extensive resources over the course of many years to build and safeguard its well-known brand name, whereas Plaintiff “offers no goods or services” but rather a “one-page . . . pass-through site that routes users to third-party travel services.” (Filing No. 97, at CM/ECF p. 12). Defendant thereby questions the merit of Plaintiff's liability claim and alleges that Plaintiff is merely “[p]osing as a legitimate competitor.” (Filing No. 97, at CM/ECF p. 12).

         As a further matter, Defendant argues that Plaintiff's Lanham Act Claims are barred by laches. (Filing No. 97, at CM/ECF p. 12-13). The equitable defense of laches “applies when a claimant inexcusably delays in asserting its claim and thereby unduly prejudices the party against whom the claim ultimately is asserted. A defendant must demonstrate the presence of three elements in order to successfully assert laches as a defense: (1) a delay in asserting a right or a claim; (2) that the delay was not excusable; and (3) that there was undue prejudice to the ...


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