Appeal from the United States District Courtfor the Central District of CaliforniaDean D. Pregerson, District Judge, PresidingArgued and SubmittedJune 8, 1999--Pasadena, CaliforniaFiled October 25, 1999Before: Dorothy W. Nelson, Stephen Reinhardt, andStephen S. Trott, Circuit Judges.Opinion by Judge Trott
_____________________________COUNSEL David W. Quinto, Quinn Emanuel Urquhart Oliver & Hedges,Los Angeles, California, for the plaintiff-counter-defendant-appellant.Ronald L. Johnston, Blanc Williams Johnston & Kronstadt,Los Angeles, California, for the defendant-counter-claimant-appellee.
_____________________________OPINION TROTT, Circuit Judge:Plaintiff Lockheed Martin Corp. ("Lockheed") appealssummary judgment in favor of Defendant Network Solutions,Inc. ("NSI") on Lockheed's action for trademark infringe-ment, unfair competition, dilution, and contributory infringe-ment under the Lanham Trademark Act of 1946, 15 U.S.C.SS 1051-1127 (1994 & Supp. I 1995), as amended (the"Lanham Act"). The district court published its decisiongranting summary judgment to NSI and refusing to grantLockheed's motion for leave to amend its complaint. 985 F.Supp. 949 (C.D. Cal. 1997). Lockheed contends that (1) genu-ine issues of material fact remain on its contributory infringe-ment claim, (2) the district court erred in holding that 15U.S.C. S 1114(2) did not create an independent basis for lia-bility, and (3) the district court should have permitted Lock-heed to amend the complaint to add a cause of action forcontributory dilution. We have jurisdiction under 28 U.S.C.S 1291 (1994), and we affirm the judgment of the districtcourt.IThis appeal concerns the NSI registration scheme fordomain-name combinations, which we discussed in our recentAvery Dennison Corp. v. Sumpton, No. 98-55810 (9th Cir.August 23, 1999), decision. An interested reader may wish toreview the district court's in-depth discussion of the Internettechnology that forms the basis of this cause of action. 985 F.Supp. at 951-53.When a third party seeks to maintain an Internet web site,that party must reserve a location, called an Internet Protocol("IP") Address, and do the necessary programming. When anInternet user accesses the third party's web site, the userenters the domain-name combination that corresponds to theIP Address and is routed to the host computer. An industry ofsurrogate hosts has developed, where an Internet Service Pro-vider licenses space on its computers to a third-party web-siteoperator, permitting the operator to maintain a web site with-out keeping his or her computer continually connected to theInternet. The Internet Service Providers do not provide thetranslation service from an entered domain-name combinationto the appropriate IP Address. A separate organization has theresponsibility to perform the translation function.AAt all relevant times, NSI was the sole National ScienceFoundation contractor in charge of registering domain-namecombinations for the top-level domains <.gov>, <.edu>,<.com>, <.org>, and <.net>. (For clarity, we set off Internet-related character strings with the caret symbols ("< >").) Afterregistration, NSI entered the combination and the correspond-ing IP Address in its database, permitting automatic transla-tion when an Internet user entered a domain-namecombination. NSI is no longer the exclusive registrar. Sinceoral argument on this appeal, a new competitive scheme hasbeen implemented. See Jeri Clausing, 3-Week Delay in Open-ing Up Internet Name Registration, N.Y. Times, June 28,1999, at C1.When registering with NSI to receive a domain-name com-bination, an applicant submits NSI's "template" electronicallyover the Internet. On approval, NSI puts the domain-namecombination in its database in conjunction with the correct IPAddress. NSI then routes Internet users who enter a certaindomain-name combination to the registrant's computer. At thetime of argument on this appeal, NSI was receiving approxi-mately 130,000 registrations per month, although evidenceindicates that the number of monthly registrations has beenincreasing steadily and is possibly much larger today. Ninetypercent of templates are processed electronically, and theentire registration process for each application requiresbetween a few minutes and a few hours. Ten percent of thetime, an employee of NSI reviews the application. Humanintervention might occur because of an error in filling out theform or because the applied-for domain name includes a"prohibited" character string -- such as specific variations onthe words Olympic, Red Cross, or NASA, and certain"obscene" words. NSI also performs a conflict check on allapplications, which compares an application to other regis-tered domain-name combinations. However, NSI does notconsult third parties during the registration process, check fora registrant's right to use a particular word in a domain-namecombination, or monitor the use of a combination once regis-tered. NSI is also not an Internet Service Provider. It performsnone of the "hosting" functions for a web site.NSI does maintain a post-registration dispute-resolutionprocedure. Anyone who feels that his or her rights are vio-lated by the domain-name combination maintained by a regis-trant can submit a certified copy of a trademark registrationto NSI. NSI then requires the registrant to obtain a declaratoryjudgment of the right to maintain the domain-name combina-tion. If the registrant fails to do so, its registration is termi-nated.BLockheed owns and operates "The Skunk Works," an air-craft design and construction laboratory. Since 1943, TheSkunk Works has developed prototypes of this country's firstjet fighter, the U-2 and SR-71 spy planes, and the F-117 andF-22 fighter planes. The Skunk Works is currently involvedin designing a possible replacement for the space shuttle."Skunk Works" is a registered and incontestable servicemark.IIThird parties, not involved in this litigation, have registereddomain-name combinations with NSI which are variations onthe phrase "skunk works." These include:<skunkworks.com>, <skunkworks.net>, <skunkwrks.com>,<skunkwerks.com>, <skunkworx.com>,<theskunkworks.com>, <skunkworks1.com>,<skunkworks.org>, <skunkwear.com>, <the-skunkwerks.com>, <skunkwurks.com>, and<theencryptedskunkworks.com>. Lockheed alleges thatmany of these registrations infringe and dilute its "SkunkWorks" service mark.Lockheed sent two letters, on May 7 and June 18, 1996,bringing the <skunkworks.com> and <skunkworks.net> regis-trations to NSI's attention. Lockheed's letters informed NSIof its belief that the third-party registrants were infringing ordiluting Lockheed's service mark. Lockheed requested thatNSI cancel the allegedly offending registrations. Lockheedalso requested that NSI cease registering domain-name com-binations that included "Skunk Works" or variations on thephrase and report to Lockheed all such domain-name combi-nations contained in its registry. NSI took no action on Lock-heed's requests, informing Lockheed by letter that Lockheedhad failed to comply with the terms of NSI's dispute resolu-tion policy. Due to Lockheed's dealings with the third-partyregistrants, <skunkworks.com> and <skunkworks.net> ceasedbeing used, but NSI did not immediately cancel the registra-tions and later permitted a new registrant to register<skunkworks.com>.Lockheed sued NSI on October 22, 1996, claiming contrib-utory service mark infringement, infringement, unfair compe-tition, and service mark dilution, all in violation of theLanham Act, and also seeking declaratory relief. The com-plaint alleged that four specific domain-name registrationsinfringed or diluted Lockheed's "Skunk Works" service mark.The parties stipulated to April 1, 1997, as the cut-off date formotions to amend the pleadings. Lockheed later proposed,over NSI's objection, that the cutoff date be moved to July 7,1997. NSI moved for summary judgment. On August 19,1997, Lockheed moved to amend its complaint to add a causeof action for contributory dilution and to allege several addi-tional domain-name combinations registered with NSI. Thedistrict court denied the motion to amend and granted sum-mary judgment to NSI.IIIWe review the district court's grant of summary judgmentde novo. Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998).Viewing the evidence in the light most favorable to the non-moving party, summary judgment is appropriate if no genuineissues of material fact remain and the non-moving party isentitled to judgment as a matter of law. See id. We review foran abuse of discretion the district court's decision denying amotion to amend a complaint. Griggs v. Pace Am. Group,Inc., 170 F.3d 877, 879 (9th Cir. 1999).IV[1] Contributory infringement occurs when the defendanteither intentionally induces a third party to infringe the plain-tiff's mark or supplies a product to a third party with actualor constructive knowledge that the product is being used toinfringe the service mark. Inwood Lab., Inc. v. Ives Lab., Inc.,
456 U.S. 844, 853
-54 (1982). Lockheed alleges only the latterbasis for contributory infringement liability and thereforemust prove that NSI supplies a product to third parties withactual or constructive knowledge that its product is being usedto infringe "Skunk Works." Id. at 854.[2] The district court assumed for purposes of summaryjudgment that third parties were infringing Lockheed's"Skunk Works" service mark, and NSI does not ask us toaffirm on the alternate ground that no genuine issue of mate-rial fact exists as to infringement. We are thus left to considertwo issues on Lockheed's contributory infringement cause ofaction: (1) whether NSI supplied a product to third parties and(2) whether NSI had actual or constructive knowledge of anyinfringement. Because we accept the district court's excellentanalysis on the first question, see 985 F. Supp. at 960-62, weaffirm summary judgment without reaching the second.AUnder the plain language of the Inwood Lab. formulation,to be liable for contributory infringement, NSI must supply a"product" to a third party with which the third party infringesLockheed's service mark.
456 U.S. at 854
. In Inwood Lab.,the Supreme Court considered an action against a manufac-turer of generic pharmaceuticals. Id. at 847. Non-party phar-macists packaged the defendant's less-expensive generic pills,but labeled them with the plaintiff's brand name. Id. at 850.The plaintiff stated a cause of action for contributory infringe-ment by alleging that the defendant "continued to supply [theproduct] to pharmacists whom the petitioners knew were mis-labeling generic drugs." Id. at 855.Inwood Lab. has been applied in the broader context ofrenting booth space at a flea market. See Hard Rock CafeLicensing Corp. v. Concession Servs., Inc., 955 F.2d 1143,1148-49 (7th Cir. 1992). In Hard Rock, the Seventh Circuitexplicitly addressed the distinction between a product and aservice, noting that while the pharmaceutical company inInwood Lab. clearly supplied a product to the third-partypharmacists, a "temporary help service . . . might not be liableif it furnished [to the defendant] the workers he employed toerect his stand." Hard Rock, 955 F.2d at 1148. The court thenheld that space at a flea market was more comparable to phar-maceuticals than to manpower, in part because of the closecomparison between the legal duty owed by a landlord to con-trol illegal activities on his or her premises and by a manufac-turer to control illegal use of his or her product. Id. at 1149.We adopted the Hard Rock analysis in Fonovisa, Inc. v.Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996), holdingthat a flea market could be liable for contributory infringe-ment if it "suppl[ied] the necessary marketplace" for the saleof infringing products. Id. at 265 (citing Hard Rock, 955 F.2dat 1149).[3] Hard Rock and Fonovisa teach us that when measuringand weighing a fact pattern in the contributory infringementcontext without the convenient "product" mold dealt with inInwood Lab., we consider the extent of control exercised bythe defendant over the third party's means of infringement.Hard Rock, 955 F.2d at 1148-49 (noting the common-lawresponsibilities of a landlord regarding illegal activity on arented premises); see Fonovisa, 76 F.3d at 265 (adoptingHard Rock's analysis). Direct control and monitoring of theinstrumentality used by a third party to infringe the plaintiff'smark permits the expansion of Inwood Lab.'s "supplies aproduct" requirement for contributory infringement.B[4] The case at bench involves a fact pattern squarely onthe "service" side of the product/service distinction suggestedby Inwood Lab and its offspring. All evidence in the recordindicates that NSI's role differs little from that of the UnitedStates Postal Service: when an Internet user enters a domain-name combination, NSI translates the domain-name combina-tion to the registrant's IP Address and routes the informationor command to the corresponding computer. Although NSI'srouting service is only available to a registrant who has paidNSI's fee, NSI does not supply the domain-name combinationany more than the Postal Service supplies a street address byperforming the routine service of routing mail. As the districtcourt correctly observed, Where domain names are used to infringe, the infringement does not result from NSI's publication of the domain name list, but from the registrant's use of the name on a web site or other Internet form of communication in connection with goods or services . . . . NSI's involvement with the use of domain names does not extend beyond registration.985 F. Supp. at 958.[5] The "direct control and monitoring" rule established byHard Rock and Fonovisa likewise fails to reach the instant sit-uation. The district court correctly recognized that NSI's rotetranslation service does not entail the kind of direct controland monitoring required to justify an extension of the"supplies a product" requirement. See 985 F. Supp. at 962("While the landlord of a flea market might reasonably beexpected to monitor the merchandise sold on his premises,NSI cannot reasonably be expected to monitor the Internet.").Such a stretch would reach well beyond the contemplation ofInwood Lab. and its progeny.In an attempt to fit under Fonovisa's umbrella, Lockheedcharacterizes NSI's service as a licensing arrangement withalleged third-party infringers. Although we accept Lockheed'sargument that NSI licenses its routing service to domain-nameregistrants, the routing service is just that -- a service. InFonovisa and Hard Rock, by contrast, the defendants licensedreal estate, with the consequent direct control over the activitythat the third-party alleged infringers engaged in on the prem-ises. Hard Rock, 955 F.2d at 1149; see Fonovisa, 96 F.3d at265.V[6] Lockheed also urges that NSI is liable as a printer orpublisher under 15 U.S.C. S 1114(2) (1994), which reads inpertinent part: [T]he remedies given to the owner of a right infringed under this chapter or to a person bringing an action under section 1125(a) of this title shall be limited as follows: (A) Where an infringer or violator is engaged solely in the business of printing the mark or violat- ing matter for others and establishes that he or she was an innocent infringer or innocent violator, the [plaintiff] shall be entitled as against such infringer or violator only to an injunction against future print- ing. (B) Where the infringement or violation com- plained of is contained in . . . an electronic commu- nication . . . , the remedies . . . shall be limited to an injunction against the presentation . . . in future transmissions of such electronic communications.Id. Section 1114(2) does not create an independent cause ofaction, but limits the remedies available to a plaintiff from aninnocent infringer, requiring infringement of a trademark rightor success on an unfair competition claim for injunctive relief.Barrios v. American Thermal Instruments, Inc., 712 F. Supp.611, 620 (S.D. Ohio 1988) ("It is important to note thatS 1114(2)(a) . . . does not relate to the potential liability of aprinter. Instead, this statute limits the relief which a Courtmay grant against a printer to an injunction against futureprinting."); see 3 J. Thomas McCarthy, Trademarks & UnfairCompetition, S 25:29 (Supp. 1998) ("The Lanham Act, asamended effective in 1989, limits the liability of innocentinfringement . . . ."). Because Lockheed does not appeal sum-mary judgment for NSI on Lockheed's claims of service markinfringement and unfair competition, Lockheed cannot estab-lish the necessary predicate for its S 1114(2) argument onappeal.VI[7] Finally, Lockheed argues that the district court abusedits discretion in failing to grant leave to amend its complaintto (1) add a contributory dilution cause of action and (2)include allegations of several other offending domain-namecombinations. As a general rule, leave to amend should be"freely given when justice so requires." Fed. R. Civ. P. 15(a);Foman v. Davis,
371 U.S. 178, 182
(1962). We consider fourfactors when reviewing a decision whether to permit anamendment: (1) bad faith on the part of the plaintiffs; (2)undue delay; (3) prejudice to the opposing party; and (4) futil-ity of the proposed amendment. Griggs, 170 F.3d at 877.[8] Although delay is not a dispositive factor in the amend-ment analysis, it is relevant, Morongo Band of Mission Indi-ans v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990), especiallywhen no reason is given for the delay, Swanson v. UnitedStates Forest Serv., 87 F.3d 339, 345 (9th Cir. 1996). Lock-heed's motion to amend came several months after the stipu-lated deadline for amending or supplementing the complaint.Nothing in the proposed amended complaint relied on factsthat were unavailable before the stipulated deadline. Theamendment was one that Lockheed had been consideringthree months before the stipulated deadline. Finally, Lock-heed did not explain the delay, but supported it based on aclaim of no prejudice to NSI.[9] A need to reopen discovery and therefore delay the pro-ceedings supports a district court's finding of prejudice froma delayed motion to amend the complaint. Solomon v. NorthAm. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir.1998). Lockheed sought to add complaints regarding newdomain-name registrants which would require NSI to conductdiscovery on each new registrant. Lockheed's new cause ofaction would also require NSI to conduct discovery ofwhether the domain-name registrants were diluting Lock-heed's service mark. The district court's factual finding thatallowing the late amendment would prejudice NSI is notclearly erroneous.[10] Bad faith on the part of the moving party also supportsdenying the motion to amend. Griggs, 170 F.3d at 881. Facinga summary judgment motion, Lockheed sought to amend itscomplaint to add causes of action on which discovery had notbeen undertaken. The district court noted that this mightreflect bad-faith on the part of Lockheed.[11] Although we conclude from the above discussion thatthe district court was well within its discretion to deny Lock-heed leave to amend its complaint, the fourth factor -- futilityof the proposed amendment -- also supports the decision.Where the legal basis for a cause of action is tenuous, futilitysupports the refusal to grant leave to amend. Morongo Band,893 F.2d at 1079. Although courts have discussed contribu-tory dilution, no appellate court or statute has yet establishedthe cause of action. Academy of Motion Picture Arts & Sci-ences v. Network Solutions, Inc., 989 F. Supp. 1276, 1279(C.D. Cal. 1997).The one court to recognize the contributory dilution causeof action defined the claim as encouraging others to dilute.Keegan v. Apple Computer Inc., 42 U.S.P.Q.2d 1053, 1062(N.D. Ill. 1996). The proposed cause of action thus appears toimport the definition of "contributory" from Inwood Lab., 456U.S. at 854. Indeed, Lockheed's proposed amended complaintalleged that NSI continued to supply its routing service to reg-istrants, knowing that these parties were diluting Lockheed's"Skunk Works" service mark. As we have already concluded,however, NSI does not supply a product or engage in the kindof direct control and monitoring required to extend theInwood Lab. rule. We agree with the district court that futilitysupports its decision to refuse leave to amend the complaint.VIINSI requested attorneys' fees pursuant to the Lanham Act,15 U.S.C. S 1117(a). We deny its request because Lockheed'sappeal was not sufficiently unreasonable or frivolous to con-stitute an "exceptional case[ ]" as required by the Lanham Actfor attorneys' fees to be warranted.VIIINSI is not liable for contributory infringement as a matterof law. Lockheed does not appeal the district court's decisionon its infringement, unfair competition, and dilution claimsagainst NSI, and the district court did not abuse its discretionin refusing leave to amend the complaint. We have also con-sidered Lockheed's request for judicial notice and motion tostrike and deny both.AFFIRMED.