FreecycleSunnyvale v. Freecycle Network

626 F.3d 509, 97 U.S.P.Q. 2d (BNA) 1127, 2010 U.S. App. LEXIS 24174, 2010 WL 4749044
CourtCourt of Appeals for the Ninth Circuit
DecidedNovember 24, 2010
Docket08-16382
StatusPublished
Cited by84 cases

This text of 626 F.3d 509 (FreecycleSunnyvale v. Freecycle Network) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 97 U.S.P.Q. 2d (BNA) 1127, 2010 U.S. App. LEXIS 24174, 2010 WL 4749044 (9th Cir. 2010).

Opinion

OPINION

CALLAHAN, Circuit Judge:

FreecycleSunnyvale (“FS”) is a member group of The Freecyele Network (“TFN”), an organization devoted to facilitating the recycling of goods. FS filed a declaratory action against TFN arising from a trademark licensing dispute, alleging noninfringement of TFN’s trademarks and tortious interference with FS’s business relations. FS moved for partial sum *512 mary judgment on the issue of whether its naked licensing defense to trademark infringement allowed it to avoid a finding of infringement as a matter of law. 1 TFN argued that it had established adequate quality control standards over its licensees’ services and use of the trademarks to avoid a finding of naked licensing and abandonment of its trademarks. The district court granted summary judgment to FS. We hold that TFN (1) did not retain express contractual control over FS’s quality control measures, (2) did not have actual controls over FS’s quality control measures, and (3) was unreasonable in relying on FS’s quality control measures. Because we find that TFN engaged in naked licensing and thereby abandoned its trademarks, we affirm.

I

A

In March 2003, Deron Beal (“Beal”) founded TFN, an umbrella non-profit Arizona corporation dedicated to “freecycling.” The term “freecycling” combines the words “free” and “recycling” and refers to the practice of giving an unwanted item to a stranger so that it can continue to be used for its intended purpose, rather than disposing of it. 2 As practiced by TFN, freecycling is primarily a local activity conducted by means of internet groups, which are created by volunteers through online service providers like Yahoo! Groups and Google Groups. 3 Although not required to do so, most TFN member groups use Yahoo! Groups as a forum for members to coordinate their freecycling activities. TFN also maintains its own website, www.freecycle.org, which provides a directory of member groups as well as resources for volunteers to create new groups. The website also includes a section devoted to etiquette guidelines.

TFN asserts that it maintains a “Free-cycle Ethos” — a democratic leadership structure, in which decisions are made through a process of surveys and discussions among volunteer moderators. Local volunteer moderators are responsible for enforcing TFN’s rules and policies, but the moderators have flexibility in enforcement depending on the moderators’ assessment of their local communities.

Since May 2003, TFN has been using three trademarks, FREECYCLE, THE *513 FREECYCLE NETWORK, and a logo (collectively “the trademarks”) to identify TFN’s services and to identify member groups’ affiliation with TFN. Federal registration of the trademarks is currently pending in the United States, but the trademarks have been registered in other countries. TFN permits member groups to use the trademarks. When TFN first started, Beal personally regulated the use of the trademarks but, as TFN has grown, it has relied on local moderators to regulate member groups’ use of the trademarks.

Lisanne Abraham (“Abraham”) founded FS on October 7, 2003, in Sunnyvale, California, without TFN’s knowledge or involvement. She established the group by entering into a service contract with Yahoo! Groups and becoming the group’s moderator. Upon establishing FS, Abraham adapted etiquette guidelines and instructions for how to use FS from either TFN’s or one of TFN’s member group’s website. On October 7, 2003, Abraham emailed Beal directly asking for a logo for FS, and they spoke over the phone within days of the email communication. After the phone conversation, Beal emailed Abraham on October 9, 2003, stating: ‘You can get the neutral logo from www. freecycle.org, just don’t use it for commercial purposes or you [sic] maybe Mark or Albert can help you to do your own fancy schmancy logo!” 4 This email is the only record of a direct communication between FS and TFN regarding the use of any of the trademarks.

Between October 7, 2003, and October 9, 2003, FS was added to TFN’s list of online freecyeling groups displayed on TFN’s website. Then, on October 9, 2003, Abraham received an email from Beal addressed to nineteen moderators of new freecycle Yahoo! Groups which, among other things, welcomed them to TFN. The email did not discuss or include any restrictions or guidance on the use of TFN’s trademarks. On October 13, 2003, Abraham received another email from TFN, this time an invitation to join the “freecyelemodsquad” Yahoo! Group (“modsquad group”), an informal discussion forum exclusively for the moderators of freecycle Yahoo! Groups to share ideas.

Before 2004, TFN had only a few suggested guidelines in the etiquette section of its website, including a “Keep it Free” rule. Then, on January 4, 2004, Beal sent an email to the modsquad group, asking whether TFN should also limit listed items to those that were legal. Ultimately, Beal proposed the adoption of a “Keep it Free, Legal & Appropriate for All Ages” rule and asked “that all moderators vote on whether they feel this is the one rule that should apply to ALL local groups or not.” Between January 4 and January 11, 2004, a majority of the modsquad group voted to require all local groups to adopt the rule and, on January 11, Beal informed the group that “I’m glad to say ... we now have one true guiding principle.” Although the moderators adopted the “Keep it Free, Legal & Appropriate for All Ages” rule, following its adoption, they frequently discussed what the actual meaning of the rule was and, ultimately, its definition and enforcement varied from group to group.

Although the underlying reason is not evident from the record or the parties’ briefs, on November 1 and November 14, 2005, TFN sent emails to FS ordering the group to cease and desist using the Free-cycle name and logo and threatening to *514 have Yahoo! terminate FS’s Yahoo! Group if FS did not comply. On November 5, FS emailed Yahoo! and disputed TFN’s ability to forbid the use of the trademarks by informing Yahoo! of the license that TFN allegedly had granted FS in October 2003 (i.e., Beal’s October 9, 2003 email authorizing Abraham to use the logo). On November 21, Yahoo! terminated the FS Yahoo! Group at TFN’s request, after receiving a claim from TFN that FS was infringing on TFN’s trademark rights.

B

On January 18, 2006, FS filed a declaratory judgment action against TFN in the U.S. District Court for the Northern District of California, alleging noninfringement of TFN’s trademarks and tortious interference with FS’s business relations. TFN brought counterclaims for trademark infringement and unfair competition under the Lanham Act and California Business and Professions Code section 17200.

FS then moved for summary judgment on the issue of whether its naked licensing defense to trademark infringement allowed it to avoid a finding of infringement as a matter of law.

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626 F.3d 509, 97 U.S.P.Q. 2d (BNA) 1127, 2010 U.S. App. LEXIS 24174, 2010 WL 4749044, Counsel Stack Legal Research, https://law.counselstack.com/opinion/freecyclesunnyvale-v-freecycle-network-ca9-2010.