Australian Financier’s Abuse of Trademark Law to Suppress a Critical Blog: A Perpetual Problem in the N.D. Cal.

by Paul Alan Levy

There is somebody on the other side of the Pacific Ocean who has a strongly negative perspective on Nicholas Assef, the head honcho at an Australian financial services firm called Lincoln Crowne – or at least, somebody held such views nine years ago.   We know at least that much because, in 2007, an anonymous individual created a small Google blog, using the URL, and posted a “warning” urging people who were considering doing business with  Assef and his company to do their due diligence first.  And even though the blog is buried deep in the Google search results for someone entering a search using lincoln crowne as the search string (currently, it is on the tenth page of results), Assef is plainly rankled by this criticism.  We know that first of all because seven years later, after Google refused to take down the blog, Lincoln Crowne sued Google for defamation in Australia (which lacks the US protection for online hosts that section 230 affords).  Google initially responded to the lawsuit by taking down the blog, but later restored the blog to its DOT.COM domain.  It is not clear to me whether Lincoln Crowne ever pursued the suit against Google to judgment.  The company’s papers do not make reference to any judgment, so I assume there was none.

We have a sense of how upset Assef must be because last year, Lincoln Crowne and its principal filed a lawsuit against the anonymous blogger in the Northern District of California, claiming both defamation and trademark infringement.  They are represented by Mitchell Silberberg, a large law firm whose services do not come cheap (this hyperlink is to a years-old fee application by Marc Mayer, the more senior of Assef's lawyers in this case).

The Apparent Flaws in Plaintiffs’ Lawsuit

The trademark claim is based on the proposition that use of the company name in the third-level domain for the blog constitutes infringement.  The complaint asks the court to exercise supplemental jurisdiction over the defamation claim, which is based on the allegation that everything written in the blog is a lie (does that include “and” and “the”?).  The defamation claim is a bit odd because the statute of limitations for defamation is only one year, and the suit was filed eight years after publication.  And the trademark claim is even worse – the blog is simple criticism, without selling any rival products. and there is a Ninth Circuit decision on point: Bosley Medical v. Kremer (a case that I handled), saying that non-commercial gripe sites are outside the scope of the Lanham Act.  And even if the site had some commercial aspect, what likelihood of confusion about source could be caused by a blog that is headlined  BEWARE LINCOLN CROWNE & COMPANY and then “Warning Warning Warning – Nick Assef"?.  It was only a few years ago that Charles Carreon was hit with a Lanham Act  attorney fee award in the Northern District of California for his litigation against Christopher Recouvreur over the use of Carreon’s name as the domain name of a satirical blog about Carreon. 

I find it tiresome to have to keep going back to courts in the Ninth Circuit to make these arguments:  once we win in a circuit, I prefer to preserve Public Citizen's scarce resources by moving on to other jurisdictions.  But if nobody speaks up, the win becomes a dead letter and future lawyers then start citing the lower court decision in self-justification.

The lawsuit is, to my mind, not only frivolous but a tad disingenuous:  in advancing their trademark claim, plaintiff’s counsel made a fuss about the supposed fact that the use of the trademark was causing the blog to appear near the top of Google search results, attaching this exhibit.   Now, from a First Amendment and fair use perspective, I’d be inclined to say, so what – after all, the blogger WANTS to bring her criticisms to the attention of folks doing research about the trademark holder, and she was entitled to do that by using the trademark so long as she did not deceive users about the blog being sponsored by the trademark holder.  

But what rather offended me about counsel's argument was that it was based on a search using the string “lincoln crowne blogspot” rather than ”lincoln crowne.”  Who would set about looking for the plaintiff by including “blogspot” as a search term?  Indeed, among plaintiffs’ later-filed papers is the curious fact that plaintiffs did not even create a blogspot blog for themselves until 2014, the year they started legal proceedings to try to shut down the criticism.  The papers say this was done to protect their brand, but I suspect it was done to create the basis for a arguing that they really care about having a monopoly over the use of their name on Blogger.

Counting on No Opposition

The reason why plaintiffs' lawyers have been able to get away with presenting frivolous claims and making laughable arguments is that they are proceeding ex parte.  It is no surprise that the Doe (who, taking plaintiffs’ evidence at face value, appears to have posted the blog from a public computer terminal someplace in Singapore) has not retained counsel in San Francisco to defend against this  lawsuit, and even though Google cannot be held liable for defamation (because of section 230), plaintiffs could have sued Google if they thought that had valid trademark claims, because of the IP exception to section 230.  But if they had sued Google, they would have risked Google defending itself, and what plaintiffs no doubt want is to be able to proceed unopposed.  (Is it better to suppose that plaintiffs did not sue Google because they did not want to incur the expense of litigating against Google than to entertain the hypothesis that they did not want to put too much strain on a trademark argument that they actually knew to be untenable?)

Plaintiffs’ Motion for a Default Judgment and Our Response

Given the lack of response from the anonymous blogger, plaintiffs have now sought a default judgment, with the odd twist that default is not sought on the trademark claim that was the excuse for federal jurisdiction, but only on the defamation claim.  The choice might seem odd, but it is my guess is that plaintiffs’ decision to seek default judgment only on the defamation claim was influenced by correspondence I sent earlier in the case, citing Bosley and arguing that the trademark claim was therefore contrary to settled Ninth Circuit law, as well as by my having let them know that Public Citizen would be seeking leave to enter the case to argue against default judgment.  

Also odd is the fact that the default judgment order is sought against Google, which is not a party to the lawsuit and is not in default and which, in any event, could not have been sued for defamation.  It is unclear whether plaintiffs have alerted Google to the fact that they are seeking an order from the judge directed at Google rather than at the anonymous blogger.

The problem of the unrepresented defendant  is a consistent one in lawsuits that are filed in the Northern District of California only because so many of the major Internet Service Providers are there.  We have responded to the problem in this case by asking for leave to file an amicus curiae brief opposing default judgment, but we are also asking the trial judge to emulate Judge Godbey’s approach in the Mick Haig case and appoint counsel ad litem for the Doe defendant.  Counsel ad litem would be able to participate more fully in the litigation and, indeed, pursue an appeal on the Doe’s behalf if necessary.

Our proposed amicus brief in this case argues first that the trademark claim is bogus and not a proper basis for filing the case in federal court; second that there is no basis for jurisdiction over the defamation claim which does not, in any event, provide a basis for an order compelling the removal of the entire blog, both because of the statute of limitations and because parts of the blog cannot be held defamatory because they are opinion.  Next we object to the terms of the default judgment sought: although brought in a case against the anonymous defendant who did not respond to the complaint, it would command only Google.  We argue that this maneuver is too clever by half: Google is not a party, it is not in default, and in any event it is immune from being subjected to judicial relief under section 230.  Finally, we note that because the Doe has not appeared, she has also not consented to having the case decided by a magistrate judge.  (I am grateful to Jef Pearlman and Phil Malone of Stanford's Juelsgaard IP Clinic for joining the effort as local counsel).

The Need for a Systematic Response from the Bench

But a group like Public Citizen can only get involved in so many cases in the Northern District of California.  Not only do we have limited resources, but the court makes it expensive for lawyers who do not live in California and belong that State’s bar to be lawyers in cases there.  I have been trying to suggest to lawyers and judges in that community that, considering the First Amendment implications of many of the cases that are filed involving distant defendants, the Court ought to be creating a pro bono panel to be available.  

One Northern District judge (who has since left the bench) told me that it had been his personal practice to reach out to private counsel to take appointments when he perceives a potential problem.  But the whole problem with ex parte proceedings is that the plaintiffs' lawyers have less incentive to be candid when they know they will not likely face a lawyer adversary, and the whole purpose of adversary proceedings is to tease out the problems that a busy federal judge might not notice. The very fact that this case reached the default judgment motion stage, after a series of ex parte rulings in which an experienced judge, whose conscientiousness I have been able to observe in the past, had every opportunity to notice problems that appear on the face of the complaint, suggests to me that counting on judges to notice the problems in cases like this is not enough.  Federal judges are very busy people, after all.

Thus, the very existence of such a pro bono program in the Northern District, comparable to the lists that many federal courts maintain of lawyers to whom they can refer
indigents' civil rights cases, could actually lessen the need for appointment of counsel, because if lawyers filing this sort of case were on notice that they are likely to face experienced counsel, they will have more incentive to give their clients the bad news about their chances of success up front, and maybe even give them the backbone to turn down paying work.  Moreover, lawyers who know that they will proceeding ex parte have an extra ethical obligation to present contrary authority to the Court, but our experience in the Northern District has been the lawyers do not always live up to that ethical obligation.  Knowing that they are likely to have to face that authority anyway could discourage the ducking of that duty.

The Northern District of California needs an institutional response to this problem.  Who will bring its leadership to face it?

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