Koch Indus. Inc. v. Does

KOCH INDUSTRIES, INC., Plaintiff, v. JOHN DOES, 1-25, Defendants.

Case No. 2:10CV1275DAK

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH CENTRAL DIVISION

Dated: May 9, 2011

MEMORANDUM DECISION AND ORDER

Judge Dale A. Kimball

This matter is before the court on Defendants' Motion to Quash Subpoenas, Issue Protective Order, and Dismiss Complaint. The court held a hearing on the motions on April 28, 2011. At the hearing, Plaintiff was represented by Juliette P. White and Judith Powell, and Defendants were represented by Deepak Gupta and Lester A. Perry. The court took the motion under advisement. The court has carefully considered the pleadings, memoranda, and other materials submitted by the parties, as well as the law and facts relating to these motions. Now being fully advised, the court renders the following Memorandum Decision and Order.

BACKGROUND

Koch Industries is a Kansas corporation that owns multiple companies involved in a wide variety of industries, including oil, coal, chemicals, fibers, pollution control equipment, forest and consumer products, and commodity trading. Koch describes itself as "one of the largest private companies in the world." Koch owns a number of federal trademark registrations for the Koch name and mark.

As part of the promotion of Koch's business, Koch maintains a website under the domain name kochind.com. In addition to describing its many companies, Koch's website expresses Koch's policy viewpoints on several political issues. The website also includes periodic editorials taking issue with such things as the conclusions of scientists regarding climate change and the Obama administration's environmental policies. Furthermore, Koch uses its website to respond to critics of its political viewpoints. Because of the nature of Koch's businesses, the website provides only information and there are no products for sale on the website.

During the course of this litigation, Defendants identified themselves as anonymous members of Youth for Climate Truth, a group concerned about global climate change. This case arises from a press release created by Defendants purporting to announce a decision by Koch Industries to stop funding organizations that deny climate change. The press release was emailed to various new organizations and included a link to a website created by Defendants, www.koch-inc.com. Defendants' website had the same look as the actual Koch Industries site but included the fake press release. Defendants' website also contained a link to the actual Koch website.

Defendants' press release announced that Koch would "restructure its support for organizations that undertake climate change research and advocacy." The release claimed that the company would withdraw funding from groups "whose positions on climate change could jeopardize America's continued global competitiveness in the energy and chemical sectors." Such sentiments were in stark contrast to the policy viewpoints usually expressed by Koch. The press release and website were designed to appear as though they were created by Koch and did not mention the name of Youth for Climate Truth or any of its members.

Defendants' fake website at www.koch-inc.com was up for a few hours. Despite its briefexistence, however, the press release and website drew a fair amount of media attention. The New York Times and The Hill quickly wrote articles identifying the press release and website as hoaxes. The Economist and other publications also wrote articles identifying the press release and website as spoofs. There is no evidence that any media organization was fooled by Defendants' actions. Koch Industries, however, states that it was required to spend time and money responding to numerous inquiries and investigating Defendants' conduct.

Because of the fake press release and website, Koch Industries brought the instant lawsuit asserting causes of action for federal trademark infringement, violation of the Anticybersquatting Consumer Protection Act, federal unfair competition, violation of the Computer Fraud and Abuse Act, common law trademark infringement and unfair competition, and breach of the terms and conditions of Koch Industries' website.

After filing the Complaint, Koch filed an ex parte motion for accelerated pre-conference discovery to seek the identity of the anonymous Defendants. Koch sought to serve subpoenas on Fast Domain, the domain registration company Defendants used to register the domain name koch-inc.com, and BlueHost.com, the web-hosting company Defendants used to set up the fake website. This court granted Koch's motion and the subpoenas were served.

Because of the media's coverage of the court's order allowing the issuance of subpoenas to uncover the identity of the anonymous Defendants, Defendants learned of the lawsuit and filed the present motion. In filing the motion, Defendants disclosed the name of the group behind the fake press release and website. Defendants, however, seek to keep the names of the individuals involved anonymous. Although the web companies complied with the subpoenas, the identities of individuals who may have been disclosed through such compliance have not been disclosedpublicly or to the court.

DISCUSSION

Defendants' Motion to Quash Subpoenas, Issue Protective Order, and Dismiss Complaint

Defendants' motion seeks two forms of relief: the protection of Defendants' identities and the dismissal of Koch's Complaint. These two requests are governed by differing standards. Defendants' motion to dismiss is subject to the standard requirements for evaluating a motion to dismiss. Defendants' request to quash the subpoenas and protect individual identities from disclosure is subject to a separate standard applied in cases involving First Amendment concerns. The parties fundamentally disagree as to whether Defendants' conduct is political speech protected by the First Amendment or unprotected commercial speech. Because Defendants' motion to dismiss raises the issue of whether Defendants' conduct constitutes commercial speech and can potentially be dispositive of the discovery motion, the court will analyze the motion to dismiss first.

A. Motion to Dismiss

Defendants argue that Koch's Complaint fails to state a claim upon which relief can be granted and the court should dismiss this action. Koch, however, claims that it has established a prima facie case against Defendants on each of its causes of action. Koch's Complaint asserts causes of action that can be addressed in three main groups: (1) federal and common law trademark infringement and unfair competition; (2) violation of the Anticybersquatting Consumer Protection Act ("ACPA"); and (3) violation of the Computer Fraud and Abuse Act ("CFAA") and breach of contract.

1. Trademark Infringement and Unfair Competition (Counts I, III, and V)

Defendants argue that Koch's first, third, and fifth claims alleging trademark infringement and unfair competition under state and federal law should be dismissed because there was no commercial use of the trademark; rather, the trademark was solely used to make a political statement. Koch asserts, however, that its Complaint pleads a prima facie case of trademark infringement and its claim should not be dismissed because it does not know the full extent of Defendants' unauthorized use of Koch's marks at this stage of the litigation. Koch's Complaint alleges that Defendants issued the press release and set up the false website "to deceive and confuse the public, to disrupt and harm Koch's business and reputation, and to draw attention to and funding for Defendants' activities."

"The Lanham Act is constitutional because it only regulates commercial speech, which is entitled to reduced protections under the First Amendment." Taubman v. Webfeats, 319 F.3d 770, 774 (6th Cir. 2003). Thus, the threshold question in assessing Koch's claims is whether the Defendants' speech was "commercial and therefore within the jurisdiction of the Lanham Act." Id. The Tenth Circuit has held that a plaintiff seeking to invoke the Lanham Act "must show that the alleged infringer used the plaintiff's mark 'in connection with any goods or services.'" Utah Lighthouse Ministry v. F.A.I.R., 527 F.3d 1045, 1050 (10th Cir. 2008). That requirement is "commonly described as the commercial use requirement." Id. at 1051-52.

In Utah Lighthouse Ministry, an anti-Mormon entity sued a pro-Mormon organization that set up a look-a-like website to parody and criticize the anti-Mormon entity. Because the look-a-like site was not selling goods or services, the Tenth Circuit found it was not commercial in any sense. Id. at 1052.

The Tenth Circuit emphasized that the scope of the Lanham Act is strictly limited to its function of policing commercial competition for consumers' benefit. "The Lanham Act is intended 'to protect the ability of consumers to distinguish among competing producers, ' not to prevent all unauthorized uses." Id. (quoting Two Pesos, Inc. v. Taco Cabana, 505 U.S. 763, 774 (1992)). The Tenth Circuit, therefore, rejected the argument that it is sufficient for the use to be in connection only with the trademark owner's sale of goods or services:

In our view, the defendant in a trademark infringement and unfair competition case must use the mark in connection with the goods and services of a competing producer, not merely to make a comment on the trademark owner's goods and services.... Unless there is a competing good or service labeled or associated with the plaintiff's trademark, the concerns of the Lanham Act are not invoked.

Id. at 1054 (emphasis added).

In this case, Defendants' press release and fake website did not relate to any goods or services and were only political in nature. Not only did the press release and website not relate to Defendants' goods and services, they did not relate to Koch's goods and services. The press release addressed only Koch's views on political issues, it did not address Koch's commercial goods...