Appeal from the United States District Courtfor the Central District of CaliforniaJ. Spencer Letts, District Judge, PresidingArgued and SubmittedJune 8, 1999--Pasadena, CaliforniaFiled August 23, 1999Before: Dorothy W. Nelson, Stephen Reinhardt, andStephen S. Trott, Circuit Judges.Opinion by Judge Trott
_____________________________COUNSEL G. Gervaise Davis, III, Davis & Schroeder, Monterey, Cali-fornia, for the defendants-counter-claimants-appellants.Adrian Mary Pruetz (Argued), and David W. Quinto (On theBriefs), Quinn Emanuel Urquhart Oliver & Hedges, LosAngeles, California, for the plaintiff-counter-defendant-appellee.
_____________________________OPINION TROTT, Circuit Judge:Jerry Sumpton and Freeview Listings Ltd. (together,"Appellants") appeal an injunction in favor of Avery Denni-son Corp., entered after summary judgment for Avery Denni-son on its claims of trademark dilution under the FederalTrademark Dilution Act of 1995, 15 U.S.C. S 1125(c) (Supp.II 1996) (amending the Lanham Trademark Act of 1946, 15U.S.C. SS 1051-1127 (1994)), and the California dilution stat-ute, Cal. Bus. & Prof. Code S 14330 (West 1987). The districtcourt published an opinion, 999 F. Supp. 1337 (C.D. Cal.1998), holding that Appellants' maintenance of domain nameregistrations for <avery.net> and <dennison.net> diluted twoof Avery Dennison's separate trademarks, "Avery " and"Dennison." (Note that when referencing Internet addresses,domain-name combinations, e-mail addresses, and otherInternet-related character strings, we use the caret symbols("< >"), in order to avoid possible confusion.) The districtcourt then entered an injunction ordering Appellants to trans-fer the domain-name registrations to Avery Dennison inexchange for $300 each.We have jurisdiction under 28 U.S.C. S 1291 (1994).Because Avery Dennison failed to create a genuine issue offact on required elements of the dilution cause of action, wereverse and remand with instructions to enter summary judg-ment for Appellants and to consider Appellants' request forattorneys' fees in light of this decision.IBackgroundWe are the third panel of this court in just over a year facedwith the challenging task of applying centuries-old trademarklaw to the newest medium of communication -- the Internet.(See Brookfield Communications, Inc. v. West Coast Ent.Corp., 174 F.3d 1036 (9th Cir. 1999), and Panavision Int'l,L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998).) Although weattempt to set out the background facts as clearly as possible,the interested reader may wish to review some of the follow-ing sources for a more complete understanding of the Internet:Brookfield, 174 F.3d at 1044-45; Intermatic, Inc. v. Toeppen,947 F. Supp. 1227, 1230-32 (N.D. Ill. 1996); and MarshallLeaffer, Domain Names, Globalization and InternetCommerce, 6 Ind. J. Global Legal Stud. 139, 139-46 (1998).Two communicative functions of the Internet are relevantto this appeal: the capacity to support web sites and the corol-lary capacity to support electronic mail ("e-mail"). A website, which is simply an interactive presentation of data whicha user accesses by dialing into the host computer, can be cre-ated by any user who reserves an Internet location -- calledan Internet protocol address -- and does the necessary pro-gramming. Because an Internet protocol address is a string ofinteger numbers separated by periods, for example,<129.137.84.101>, for ease of recall and use a user relies ona "domain-name combination" to reach a given web site. Theregistrar of Internet domain names, Network Solutions, Inc.("NSI"),1 maintains a database of registrations and translatesentered domain-name combinations into Internet protocoladdresses. When accessing a web site, a user enters the char-acter string <http://www.>,2 followed by the reserved domain-name combination. The domain-name combination mustinclude a top-level domain ("TLD"), which can be <.com>,<.net>, <.org>, <.gov> or <.edu>, among others, althoughsome, like <.gov> and <.edu>, are reserved for specific pur-poses. The combination also includes a second-level domain("SLD"), which can be any word not already reserved in com-bination with the TLD.3 Once a domain-name combination isreserved, it cannot be used by anybody else, unless the firstregistrant voluntarily or otherwise relinquishes its registration.A web site can be programmed for multiple purposes.Some merchants maintain a form of "electronic catalog" onthe Internet, permitting Internet users to review products andservices for sale. A web site can also be programmed for e-mail, where the provider licenses e-mail addresses in the for-mat <alias@SLD.TLD>, with <alias> selected by the e-mailuser. A person or company maintaining a web site makesmoney in a few different ways. A site that aids in marketinggoods and services is an asset to a merchant. E-mail providersmake money from licensing fees paid by e-mail users. Moneyis also made from advertising and links to other web sites.IIFactsSumpton is the president of Freeview, an Internet e-mailprovider doing business as "Mailbank." Mailbank offers"vanity" e-mail addresses to users for an initial fee of $19.95and $4.95 per year thereafter, and has registered thousands ofdomain-name combinations for this purpose. Most SLDs thatMailbank has registered are common surnames, althoughsome represent hobbies, careers, pets, sports interests, favoritemusic, and the like. One category of SLDs is titled "Rude"and includes lewd SLDs, and another category, titled"Business," includes some common trademark SLDs. Mail-bank's TLDs consist mainly of <.net> and <.org>, but someregistered domain name combinations, including most in the"Business" and "Rude" categories, use the TLD <.com>.Mailbank's surname archives include the domain-name com-binations <avery.net> and <dennison.net>.Avery Dennison sells office products and industrial fasten-ers under the registered trademarks "Avery" and "Dennison,"respectively. "Avery" has been in continuous use since the1930s and registered since 1963, and "Dennison" has been incontinuous use since the late 1800s and registered since 1908.Avery Dennison spends more than $5 million per year adver-tising its products, including those marketed under the sepa-rate "Avery" and "Dennison" trademarks, and the companyboasts in the neighborhood of $3 billion in sales of all of itstrademarks annually. No evidence indicates what percentageof these dollar figures apply to the "Avery" or "Dennison"trademarks. Avery Dennison maintains a commercial pres-ence on the Internet, marketing its products at <avery.com>and <averydennison.com>, and maintaining registrations forseveral other domain-name combinations, all using the TLD<.com>.Avery Dennison sued Appellants, alleging trademark dilu-tion under the Federal Trademark Dilution Act and CaliforniaBusiness and Professional Code S 14330. Avery Dennisonalso sued NSI, alleging contributory dilution and contributoryinfringement. The district court granted summary judgment toNSI on Avery Dennison's claims. The district court then con-cluded as a matter of law that the disputed trademarks werefamous and denied summary judgment to Appellants andgranted summary judgment to Avery Dennison on its dilutionclaims, entering an injunction requiring Appellants to transferthe registrations to Avery Dennison. 983 F. Supp. at 1342.IIITrademark LawTrademark protection is "the law's recognition of the psy-chological function of symbols." Mishawaka Rubber &Woolen Mfg. Co. v. S.S. Kresge Co.,
316 U.S. 203
, 205(1942). Two goals of trademark law are reflected in the fed-eral scheme. On the one hand, the law seeks to protect con-sumers who have formed particular associations with a mark.On the other hand, trademark law seeks to protect the invest-ment in a mark made by the owner. Qualitex Co. v. JacobsonProds. Co.,
514 U.S. 159, 163
-64 (1995).Until recently, federal law provided protection only againstinfringement of a registered trademark, or the unregisteredtrademark analog, unfair competition. See SS 32 & 43(a) ofthe Lanham Trademark Act of 1946, as amended, 15 U.S.C.SS 1114, 1125(a) (1994). These causes of action require aplaintiff to prove that the defendant is using a mark confus-ingly similar to a valid, protectable trademark of the plain-tiff's. Brookfield, 174 F.3d at 1046.[1] Many states, however, have long recognized anothercause of action designed to protect trademarks: trademarkdilution. Lori Krafte-Jacobs, Comment, Judicial Interpreta-tion of the Federal Trademark Dilution Act of 1995 , 66 U.Cin. L. Rev. 659, 660-62 (1998) (discussing the evolution ofthe dilution doctrine). With the 1995 enactment of the FederalTrademark Dilution Act, dilution became a federal-lawconcern. Unlike infringement and unfair competition laws, ina dilution case competition between the parties and a likeli-hood of confusion are not required to present a claim forrelief. See 15 U.S.C. S 1127 (Supp. II 1996) (definition of"dilution"); Leslie F. Brown, Note, Avery Dennison Corp. v.Sumpton, 14 Berkeley Tech. L.J. 247, 249 (1999). Rather,injunctive relief is available under the Federal TrademarkDilution Act if a plaintiff can establish that (1) its mark isfamous; (2) the defendant is making commercial use of themark in commerce; (3) the defendant's use began after theplaintiff's mark became famous; and (4) the defendant's usepresents a likelihood of dilution of the distinctive value of themark. Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1324(9th Cir. 1998) (interpreting 15 U.S.C. S 1125(c)(1)).[2] California's dilution cause of action is substantiallysimilar, providing relief if the plaintiff can demonstrate a"[l]ikelihood of injury to business reputation or of dilution ofthe distinctive quality of a mark . . . , notwithstanding theabsence of competition between the parties or the absence ofconfusion as to the source of goods or services. " Cal. Bus. &Prof. Code S 14330. We have interpreted S 14330, like theFederal Trademark Dilution Act, to protect only famousmarks. Fruit of the Loom, Inc. v. Girouard, 994 F.2d 1359,1362-63 (9th Cir. 1993); see 3 J. Thomas McCarthy,Trademarks & Unfair Competition S 24:108 (Supp. 1998).IVStandard of ReviewWe review the district court's grant of a permanent injunc-tion de novo. Erickson v. United States ex rel. Dep't of Health& Human Servs., 67 F.3d 858, 861 (9th Cir. 1995). To deter-mine the legality of the injunction, we consider de novo theunderlying grant of summary judgment to Avery Dennisonand denial of summary judgment to Appellants. See Margolisv. Ryan, 140 F.3d 850, 852 (9th Cir. 1998). Viewing the evi-dence in the light most favorable to the non-moving party,summary judgment is appropriate if no genuine issues ofmaterial fact exist and the moving party is entitled to judg-ment as a matter of law. Id.VDilution ProtectionWe now turn to the dilution causes of action at issue in thiscase, brought under the Federal Trademark Dilution Act andCalifornia Business and Professional Code S 14330.In Panavision, we held that both the Federal TrademarkDilution Act and S 14330 were implicated when the defendantregistered domain-name combinations using famous trade-marks and sought to sell the registrations to the trademarkowners. 141 F.3d at 1318, 1327. Three differences madePanavision easier than the instant case. First, the defendantdid not mount a challenge on the famousness prong of thedilution tests. Panavision, 141 F.3d at 1324. Second, thePanavision defendant did not challenge the factual assertionthat he sought to profit by arbitrage with famous trademarks.Id. at 1324-25. Third, the diluting registrations in Panavisionboth involved the TLD <.com>. In the instant case, by con-trast, Appellants contest Avery Dennison's claim of famous-ness, Appellants contend that the nature of their businessmakes the trademark status of "Avery" and "Dennison" irrele-vant, and the complained-of registrations involve the TLD<.net>.AFamousnessThe district court considered evidence submitted by AveryDennison regarding marketing efforts and consumer associa-tion with its marks and concluded as a matter of law that"Avery" and "Dennison" were famous marks entitled to dilu-tion protection. 999 F. Supp. at 1339. We hold that AveryDennison failed to create a genuine issue of fact on thefamousness element of both dilution statutes.4Dilution is a cause of action invented and reserved for aselect class of marks -- those marks with such powerful con-sumer associations that even non-competing uses can impingeon their value. See generally Frank L. Schechter, The RationalBasis for Trademark Protection, 40 Harv. L. Rev. 813 (1927)(proposing a cause of action for dilution); Krafte-Jacobs,supra, at 689-91. Dilution causes of action, much more sothan infringement and unfair competition laws, tread veryclose to granting "rights in gross" in a trademark. See 3McCarthy, supra, S 24:108. In the infringement and unfaircompetition scenario, where the less famous a trademark, theless the chance that consumers will be confused as to origin,see AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 349 (9th Cir.1979), a carefully-crafted balance exists between protecting atrademark and permitting non-infringing uses. In the dilutioncontext, likelihood of confusion is irrelevant. See 15 U.S.C.S 1127; Cal. Bus. & Prof. Code S 14330; Panavision, 141F.3d at 1326. If dilution protection were accorded to trade-marks based only on a showing of inherent or acquired dis-tinctiveness, we would upset the balance in favor of over-protecting trademarks, at the expense of potential non-infringing uses. See Fruit of the Loom, 994 F.2d at 1363("[The plaintiff] would sweep clean the many business usesof this quotidian word.").We view the famousness prong of both dilution analyses asreinstating the balance -- by carefully limiting the class oftrademarks eligible for dilution protection, Congress and statelegislatures granted the most potent form of trademark protec-tion in a manner designed to minimize undue impact on otheruses. See San Francisco Arts & Athletics, Inc. v. United StatesOlympic Comm.,
483 U.S. 522
, 564 n.25 (1987) (Brennan, J.,dissenting) (citing 2 J. McCarthy, Trademarks & UnfairCompetition S 24:16, at 229 (2d ed. 1984)) (discussing limitson the dilution doctrine that help prevent overprotection oftrademarks).Therefore, to meet the "famousness" element of protectionunder the dilution statutes, " `a mark[must] be truly promi-nent and renowned.' " I.P. Lund Trading ApS v. Kohler Co.,163 F.3d 27, 46 (1st Cir. 1998) (quoting 3 McCarthy, supra,S 24.91). In a 1987 report, which recommended an amend-ment to the Lanham Act to provide a federal dilution cause ofaction, the Trademark Review Commission of the UnitedStates Trademark Association emphasized the narrow reachof a dilution cause of action: "We believe that a limited cate-gory of trademarks, those which are truly famous and registered,5 are deserving of national protection fromdilution." Trademark Review Commission, Report &Recommendations, 77 Trademark Rep. 375, 455 (Sept.-Oct.1987).[3] The Federal Trademark Dilution Act lists eight non-exclusive considerations for the famousness inquiry, 15U.S.C. S 1125(c)(1)(A)-(H), which are equally relevant to afamousness determination under Business and ProfessionalCode S 14330, see Panavision, 141 F.3d at 1324("Panavision's state law dilution claim is subject to the sameanalysis as its federal claim."). These are: (A) the degree of inherent or acquired distinctiveness of the mark; (B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used; (C) the duration and extent of advertising and public- ity of the mark; (D) the geographical extent of the trading area in which the mark is used; (E) the channels of trade for the goods or services with which the mark is used; (F) the degree of recognition of the mark in the trad- ing areas and channels of trade used by the mark's owner and the person against whom the injunction is sought; (G) the nature and extent of use of the same or simi- lar marks by third parties; and (H) whether the mark was registered . . . on the prin- cipal register.15 U.S.C. S 1125(c)(1).[4] We note the overlap between the statutory famousnessconsiderations and the factors relevant to establishingacquired distinctiveness, which is attained "when the purchas-ing public associates the [mark] with a single producer orsource rather than just the product itself." First Brands Corp.v. Fred Meyer, Inc., 809 F.2d 1378, 1383 (9th Cir. 1987).Proof of acquired distinctiveness is a difficult empiricalinquiry which a factfinder must undertake, Taco Cabana Int'l,Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1119-20 & n.7 (5thCir. 1991), aff'd,
505 U.S. 763
(1992), considering factorsincluding: [1] whether actual purchasers . . . associate the [mark] with [the plaintiff]; [2] the degree and man- ner of [the plaintiff's] advertising; [3 ] the length and manner of [the plaintiff's] use of the [mark]; and [4] whether [the plaintiff's] use of the [mark ] has been exclusive.Clamp Mfg. Co. v. Enco Mfg. Co., 870 F.2d 512, 517 (9th Cir.1989).6 Furthermore, registration on the principal registercreates a presumption of distinctiveness -- in the case of asurname trademark, acquired distinctiveness. 15 U.S.C.S 1057(b) (1994); Americana Trading Inc. v. Russ Berrie &Co., 966 F.2d 1284, 1287 (9th Cir. 1992) ("[R]egistration car-ries a presumption of secondary meaning.").[5] However, the Federal Trademark Dilution Act andBusiness and Professional Code S 14330 apply "only to thosemarks which are both truly distinctive and famous, and there-fore most likely to be adversely affected by dilution." S. Rep.No. 100-515, at 42 (emphasis added). The Trademark ReviewCommission stated that "a higher standard must be employedto gauge the fame of a trademark eligible for this extraordi-nary remedy." 77 Trademark Rep. at 461. Thus,"[t]o be capa-ble of being diluted, a mark must have a degree ofdistinctiveness and `strength' beyond that needed to serve asa trademark." 3 McCarthy, supra, S 24:109; see also Krafte-Jacobs, supra, at 690 ("If all marks are distinctive, and ashowing of distinctiveness meets the element of fame, whatmarks would be outside the protection of the FTDA?[T]heFTDA does not indicate that any particular degree of distinc-tiveness should end the inquiry." (interpreting the FederalTrademark Dilution Act)). We have previously held likewiseunder California Business and Professional CodeS 14330.Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1539(9th Cir. 1989) (requiring more than mere distinctiveness).Applying the famousness factors from the Federal Trade-mark Dilution Act to the facts of the case at bench, we con-clude that Avery Dennison likely establishes acquireddistinctiveness in the "Avery" and "Dennison" trademarks,but goes no further. Because the Federal Trademark DilutionAct requires a showing greater than distinctiveness to meetthe threshold element of fame, as a matter of law Avery Den-nison has failed to fulfill this burden.1Distinctiveness[6] We begin with the first factor in the statutory list:"inherent or acquired distinctiveness." S 1125(c)(1)(A). Nodispute exists that "Avery" and "Dennison " are common sur-names -- according to evidence presented by Appellants,respectively the 775th and 1768th most common in the UnitedStates. A long-standing principle of trademark law is the rightof a person to use his or her own name in connection with abusiness. See Howe Scale Co. v. Wyckoff, Seamans &Benedict,
198 U.S. 118, 140
(1905). This principle was incor-porated into the Lanham Act, which states that a mark that is"primarily merely a surname" is not protectable unless itacquires secondary meaning. 15 U.S.C. S 1052(e)(4), (f)(1994); Abraham Zion Corp. v. Lebow, 761 F.2d 93, 104 (2dCir. 1985); see L.E. Waterman Co. v. Modern Pen Co., 235U.S. 88, 94 (1914) (pre-Lanham Act case stating that protec-tion from confusion is available to the holder of a surnametrademark that has acquired public recognition); Horlick'sMalted Milk Corp. v. Horluck's, Inc., 59 F.2d 13, 15 (9th Cir.1932) (pre-Lanham Act case limiting the defendant's right touse his surname as a trademark where the name had acquiredpublic recognition from the efforts of a competitor). AveryDennison cannot claim that "Avery" and "Dennison" areinherently distinctive, but must demonstrate acquired distinc-tiveness through secondary meaning.The drafters of the Federal Trademark Dilution Act contin-ued the concern for surnames when adding protection againsttrademark dilution to the federal scheme. On early consider-ation of the Act, the report from the Senate Judiciary Commit-tee emphasized: "[T]he committee intended to give specialprotection to an individual's ability to use his or her ownname in good faith." S. Rep. No. 100-515, at 43 (1988). TheFederal Trademark Dilution Act imports, at a minimum, thethreshold secondary-meaning requirement for registration ofa surname trademark.[7] Avery Dennison maintains registrations of both"Avery" and "Dennison" on the principal register, prima facieevidence that these marks have achieved the secondary mean-ing required for protection from infringement and unfair com-petition. See Americana Trading, 966 F.2d at 1287. We rejectAppellants' argument that the distinctiveness required forfamousness under the Federal Trademark Dilution Act isinherent, not merely acquired distinctiveness. See 15 U.S.C.S 1125(c)(1)(A) (referring to "inherent or acquireddistinctiveness"). However, because famousness requires ashowing greater than mere distinctiveness, the presumptivesecondary meaning associated with "Avery" and "Dennison"fails to persuade us that the famousness prong is met in thiscase.2Overlapping Channels of Trade[8] We next consider the fifth and sixth factors of the statu-tory inquiry: the channels of trade for the plaintiff's goods andthe degree of recognition of the mark in the trading areas andchannels of trade used by plaintiff and defendant.S 1125(c)(1)(E), (F). The drafters of the Federal TrademarkDilution Act broke from the Trademark Review Commis-sion's recommendation that only marks "which have becomefamous throughout a substantial part of the United States"could qualify for protection. Report & Recommendation, 77Trademark Rep. at 456. Instead, fame in a localized tradingarea may meet the threshold element under the Act if plain-tiff's trading area includes the trading area of the defendant.S. Rep. No. 100-515, at 43; Washington Speakers Bureau,Inc. v. Leading Auths., Inc., 33 F. Supp. 2d 488, 503-04 (E.D.Va. 1999) (citing I.P. Lund, 163 F.3d at 46; Teletech Cus-tomer Care Mgt., Inc. v. TeleTech Co., 977 F. Supp. 1407,1413 (C.D. Cal. 1997)). The rule is likewise for specializedmarket segments: specialized fame can be adequate only if the"diluting uses are directed narrowly at the same marketsegment." Washington Speakers, 33 F. Supp. 2d at 503. Noevidence on the record supports Avery Dennison's position onthese two prongs of the famousness inquiry.[9] In Teletech, fame in a narrow market segment was pres-ent when the plaintiff showed "that the Teletech Companiesmay be the largest provider of primarily inbound integratedtelephone and Internet customer care nationwide. " 977 F.Supp. at 1409. The defendant was "a contractor providingengineering and installation services to the telecommunica-tions industry," and maintained the domain-name combina-tion, <teletech.com>. Id. at 1409-10. The court held that theshowing on the threshold element under the Federal Trade-mark Dilution Act was adequate to qualify for a preliminaryinjunction. Id. at 1413. In Washington Speakers, both theplaintiff and defendant were in the business of schedulingspeaking engagements for well-known lecturers. 33 F. Supp.2d at 490, 503 & n.31 (citing cases). In the instant case, bycontrast, Appellants' sought-after customer base is Internetusers who desire vanity e-mail addresses, and Avery Denni-son's customer base includes purchasers of office productsand industrial fasteners. No evidence demonstrates that AveryDennison possesses any degree of recognition among Internetusers or that Appellants direct their e-mail services at AveryDennison's customer base.3Use of the Marks by Third Parties[10] The seventh factor, "the nature and extent of use of thesame . . . marks by third parties," S 1125(c)(1)(G), undercutsthe district court's conclusion as well. All relevant evidenceon the record tends to establish that both "Avery " and"Dennison" are commonly used as trademarks, both on andoff of the Internet, by parties other than Avery Dennison. Thisevidence is relevant because, when "a mark is in widespreaduse, it may not be famous for the goods or services of onebusiness." Report & Recommendation, 77 Trademark Rep. at461; see Accuride, 871 F.2d at 1539 (affirming the districtcourt's holding that widespread use of elements of a trade-mark helped to defeat a dilution claim).The record includes copies of five trademark registrationsfor "Avery" and "Averys," a computer printout of a list ofseveral businesses with "Avery" in their names who marketproducts on the Internet, and a list of business names includ-ing "Avery," which, according to a declaration submitted byNSI, is a representative sample of over 800 such businesses.The record also contains a computer printout of a list of sev-eral businesses with "Dennison" in their names which marketproducts on the Internet and a list of business names including"Dennison," a representative sample of over 200 such busi-nesses. Such widespread use of "Avery" and "Dennison"makes it unlikely that either can be considered a famous markeligible for the dilution cause of action.4Other Famousness Factors[11] Avery Dennison argues that evidence of extensiveadvertising and sales, international operations, and consumerawareness suffices to establish fame. We agree that theremaining four statutory factors in the famousness inquirylikely support Avery Dennison's position. Both "Avery" and"Dennison" have been used as trademarks for large fractionsof a century and registered for decades. Avery Dennisonexpends substantial sums annually advertising each mark,with some presumable degree of success due to Avery Denni-son's significant annual volume of sales. In addition, AveryDennison markets its goods internationally. See 15 U.S.C.S 1125(c)(1)(B)-(D), (G). However, we disagree that AveryDennison's showing establishes fame.Avery Dennison submitted three market research studiesregarding perceptions of the "Avery" and "Avery Dennison"brands. Discussion groups through which one study was con-ducted were formed "using Avery client lists, " and producedthe conclusion that the "Avery" name has "positive associa-tions . . . among current customers." Surveyed persons in theother two studies were mostly "users and purchasers of officeproducts" and "[o]ffice supply consumers. " The one con-sumer group that did not necessarily include office supplypurchasers for businesses was still required to be "somewhat"or "very" familiar with Avery products in order to be counted.[12] Avery Dennison's marketing reports are comparable toa survey we discussed in Anti-Monopoly, Inc. v. General MillsFun Group, Inc., 684 F.2d 1316 (9th Cir. 1981), proving onlythe near tautology that consumers already acquainted withAvery and Avery Dennison products are familiar with AveryDennison. See id. at 1323-24. The marketing reports add noth-ing to the discussion of whether consumers in general haveany brand association with "Avery" and "Avery Dennison,"and no evidence of product awareness relates specifically tothe "Dennison" trademark. Although proper consumer sur-veys might be highly relevant to a showing of fame, we rejectany reliance on the flawed reports submitted by Avery Denni-son.[13] Finally, Avery Dennison -- like any company market-ing on the Internet -- markets its products worldwide. See 15U.S.C. S 1125(c)(1)(D). By itself, this factor carries noweight; worldwide use of a non-famous mark does not estab-lish fame. Because famousness requires more than mere dis-tinctiveness, and Avery Dennison's showing goes no furtherthan establishing secondary meaning, we hold that AveryDennison has not met its burden to create a genuine issue offact that its marks are famous. Avery Dennison's failure tofulfill its burden on this required element of both dilutioncauses of action mandates summary judgment for Appellants.5Likelihood of Confusion Remains Irrelevant[14] We recognize that our discussion of the breadth offame and overlapping market segments begins to sound likea likelihood of confusion analysis, and we agree with AveryDennison that likelihood of confusion should not be consid-ered under either the Federal Trademark Dilution Act or Busi-ness and Professional Code S 14330. However, as we discussabove, the famousness element of the dilution causes of actionserves the same general purpose as the likelihood of confu-sion element of an infringement or unfair competition analysis-- preventing the trademark scheme from granting exces-sively broad protection at the expense of legitimate uses. SeeFruit of the Loom, 994 F.2d at 1363 ("Whittling away will notoccur unless there is at least some subliminal connection in abuyer's mind between the two parties' uses of their marks.").The close parallels between the two analyses are therefore notsurprising; nor do they cause us concern.BCommercial UseAddressing the second element of a cause of action underthe Federal Trademark Dilution Act, the district court heldthat Appellants' registration of <avery.net> and<dennison.net> constituted commercial use. 999 F. Supp. at1339-40. We disagree.[15] Commercial use under the Federal Trademark DilutionAct requires the defendant to be using the trademark as atrademark, capitalizing on its trademark status. SeePanavision, 141 F.3d at 1325. Courts have phrased thisrequirement in various ways. In a classic "cybersquatter"case, one court referenced the defendants "intention toarbitrage" the registration which included the plaintiff's trade-mark. Intermatic, 947 F. Supp. at 1239. Another court, whosedecision we affirmed, noted that the defendant "traded on thevalue of marks as marks." Panavision Int'l, L.P. v. Toeppen,945 F. Supp. 1296, 1303 (C.D. Cal. 1996), aff'd , 141 F.3d1316 (9th Cir. 1998). In our Panavision decision, we consid-ered the defendant's "attempt to sell the trademarksthemselves." 141 F.3d at 1325.[16] All evidence in the record indicates that Appellantsregister common surnames in domain-name combinations andlicense e-mail addresses using those surnames, with the con-sequent intent to capitalize on the surname status of "Avery"and "Dennison." Appellants do not use trademarks qua trade-marks as required by the caselaw to establish commercial use.Rather, Appellants use words that happen to be trademarks fortheir non-trademark value. The district court erred in holdingthat Appellants' use of <avery.net> and <dennison.net> con-stituted commercial use under the Federal Trademark DilutionAct, and this essential element of the dilution causes of actionlikewise mandates summary judgment for Appellants.CDilutionThe district court then considered the dilution requirementunder both statutes, holding that Appellants' use of<avery.net> and <dennison.net> caused dilution, or a likeli-hood of dilution, of "Avery" and "Dennison. " 999 F. Supp. at1340-41. We hold that genuine issues of fact on this elementof the causes of action should have precluded summary judg-ment for Avery Dennison.Two theories of dilution are implicated in this case. First,Avery Dennison argues that Appellants' conduct is the cyber-squatting dilution that we recognized in Panavision. See 141F.3d at 1326-27. Second, Avery Dennison argues that Appel-lants' conduct in housing the <avery.net> and <dennison.net>domain names in the same database as various lewd SLDscauses tarnishment of the "Avery" and "Dennison" marks.1Cybersquatting[17] Cybersquatting dilution is the diminishment of " `thecapacity of the [plaintiff's] marks to identify and distinguishthe [plaintiff's] goods and services on the Internet.' "Panavision, 141 F.3d at 1326 (quoting the Panavision districtcourt, 945 F. Supp. at 1304). We recognized that this canoccur if potential customers cannot find a web page at<trademark.com>. Id. at 1327; see also Brookfield, 174 F.3dat 1045 ("The Web surfer who assumes that " `X'.com" willalways correspond to the web site of company X or trademarkX will, however, sometimes be misled."). Dilution occursbecause " `[p]rospective users of plaintiff's services . . . mayfail to continue to search for plaintiff's own home page, dueto anger, frustration or the belief that plaintiff's home pagedoes not exist.' " Panavision, 141 F.3d at 1327 (quoting Jewsfor Jesus v. Brodsky, 993 F. Supp. 282, 306-07 (D.N.J.1998)).[18] In the instant case, Appellants registered the TLD<.net>, rather than <.com>, with the SLDs <avery> and<dennison>. As we recognized in Panavision, <.net> appliesto networks and <.com> applies to commercial entities. 141F.3d at 1318. Evidence on the record supports this distinction,and courts applying the dilution cause of action to domain-name registrations have universally considered<trademark.com> registrations. See Brown, Note, supra, at251-54 (discussing cases); id. at 262-63 (addressing the<.com> versus <.net> distinction). Although evidence on therecord also demonstrates that the <.com> and <.net> distinc-tion is illusory, a factfinder could infer that dilution does notoccur with a <trademark.net> registration. This genuine issueof fact on the question of cybersquatting dilution should haveprevented summary judgment for Avery Dennison.2Tarnishment[19] Tarnishment occurs when a defendant's use of a marksimilar to a plaintiff's presents a danger that consumers willform unfavorable associations with the mark. See Hasbro,Inc. v. Internet Ent. Group, Ltd., 40 U.S.P.Q.2d 1479, 1480(W.D. Wash. 1996) (<candyland.com> as a domain-namecombination for a sexually explicit web site diluted plaintiff'strademark, "Candyland," for a children's game); 3 McCarthy,supra, S 24:104. The district court did not reach Avery Denni-son's claims regarding tarnishment.[20] Avery Dennison offers, as an alternative ground foraffirming the district court, the fact that Appellants house<avery.net> and <dennison.net> at the same web site as lewddomain-name registrations. However, the evidence likewiseindicates that to move from <avery.net> or dennison.net> toa lewd SLD requires "linking" through the Mailbank homepage, which might remove any association with the "Avery"and "Dennison" trademarks that the Internet user might havehad. See Fruit of the Loom, 994 F.2d at 1363 (requiring someconnection between the two parties' uses of their marks).Whether Appellants' use of the registrations presents a dangerof tarnishment is an issue of fact that could not be decided onsummary judgment.DInjunction[21] Under the Federal Trademark Dilution Act and Busi-ness and Professional Code S 14330, an injunction may issueif Appellants' conduct dilutes, or is likely to dilute, AveryDennison's trademarks. 15 U.S.C. S 1125(c)(1); Cal. Bus. &Prof. Code S 14330. Actual success on the merits of a claimis required for a permanent injunction. Walters v. Reno, 145F.3d 1032, 1048 (9th Cir. 1998). Because we conclude thatthe district erred as a matter of law in finding "Avery" and"Dennison" to be famous and Appellants' use of <avery.net>and <dennison.net> to be commercial use, and because genu-ine issues of material fact existed as to whether Appellants'use of the domain-name registrations dilutes or is likely todilute Avery Dennison's marks, the district court necessarilyerred in granting Avery Dennison an injunction.VIAttorneys' FeesFinally, we address Appellants' application for attorneys'fees. The Lanham Act permits an award of attorneys' fees toa prevailing party "in exceptional cases." 15 U.S.C. S 1117(a).Imposition of attorneys' fees is warranted if " `a plaintiff'scase is groundless, unreasonable, vexatious, or pursued in badfaith.' " Stephen W. Boney, Inc. v. Boney Servs., Inc., 127F.3d 821, 826-27 (9th Cir. 1997) (quoting Scott Fetzer Co. v.Williamson, 101 F.3d 549, 555 (8th Cir. 1996)).As an appellate court, we are ill-equipped to determineAvery Dennison's motivation for bringing and pursuing thislitigation. We therefore remand the attorneys' fees question tothe district court for determination.VIIConclusionWe reverse the district court's summary judgment in favorof Avery Dennison and remand with instructions to entersummary judgment for Sumpton and Freeview. We alsoremand Appellants' request for attorneys' fees for a determi-nation by the district court. Finally, we deny Avery Denni-son's motion to strike portions of Appellants' brief, and wedeny Appellants' request for judicial notice.REVERSED and REMANDED. the end
___________________________FOOTNOTES 1 At the time of publication of this opinion, NSI is no longer the exclu-sive registrar of domain names. A new competitive scheme is being imple-mented by the Commerce Department, and one competitor,"register.com," is currently in operation. See generally Jeri Clausing,3-Week Delay in Opening Up Internet Name Registration, N.Y. Times,June 28, 1999, at B10.2 Although initial character strings other than <www.> are also used,see, e.g., Michael K. Lindsey, Just an Address, Los Angeles Daily Journal,Friday, June 18, 1999, at 7 (citing a web page at <http://wipo2.wipo.int>),we only consider <www.>, which stands for "World-Wide Web."3 Some specific "vulgar" words and a few words that are prevented byfederal statute from being used by private entities are not available asSLDs.4 Although the famousness of "Avery" and "Dennison" is disputed, nodispute exists on the third element of dilution under Panavision: Appel-lants' use must begin after the marks became famous. Any fame thatAvery Dennison's marks have acquired existed before November, 1996,when Appellants' use began.5 The Trademark Review Commission's recommended amendment isvery similar to the language of the eventually-enacted Federal TrademarkDilution Act. The main difference relevant to the famousness inquiry isthat the Commission's recommendation only permitted a cause of actionto the owner of a registered mark, while the owner of any protectable markor trade name can bring a cause of action under the enacted version of theFederal Trademark Dilution Act.6 The Clamp court specifically discussed a trademark in a product con-figuration, rather than in a word or symbol, and the First Brands and TwoPesos courts dealt with trade dress. However, the analysis is the same. SeeTwo Pesos, Inc. v. Taco Cabana, Inc.,
505 U.S. 763, 768
-76 (1992)(applying the rules applicable to unfair competition to trade dress); ClampMfg. Co. v. Enco Mfg. Co., 870 F.2d 512, 515-16 (9th Cir. 1989) (applyingthe rule for acquired distinctiveness to the design of a product); seegenerally Graeme B. Dinwoodie, Reconceptualizing the Inherent Distinc-tiveness of Product Design Trade Dress, 75 N.C. L. Rev. 471 (1997) (dis-cussing the application of trademark infringement and unfair competitionlaw to product design and trade dress).