WIPO Arbitration and Mediation Center

ADMINISTRATIVE PANEL DECISION

The Chip Merchant, Inc. v. Blue Star Electronics, d/b/a Memory World

Case No. D2000-0474

The Complainant is The Chip Merchant, Inc., a corporation organized in the state of California, United States of America (USA), with a principal place of business in San Diego, California.

The Respondent is Blue Star Electronics, d/b/a Memory World, a corporation organized in the state of California, United States of America (USA), with a principal place of business in Fremont, California.

The disputed domain names are "THECHIPMERCHANT.NET"; "CHIPMERCHANT.COM", and "CHIPMERCHANT.NET."

The registrar of the disputed domain name is Network Solutions, Inc., with business address in Herndon, Virginia, USA.

The essential procedural history of the administrative proceeding is as follows:

The Complainant initiated the proceeding by the filing of a Complaint via e-mail, received by the WIPO Arbitration and Mediation Center ("WIPO") on May 24, 2000, and by courier mail received by WIPO on June 6, 2000. Payment by Complainant of the requisite filing fees accompanied the courier mailing. On June 20, 2000, WIPO completed its formal filing compliance requirements checklist.

On June 19, 2000, WIPO transmitted notification of the Complaint and initiation of the proceeding to the Respondent via e-mail, facsimile, and courier; this document represented June 20, 2000, as the commencement of this administrative proceeding (Rules for Uniform Domain Name Dispute Resolution Policy, para. 4(c)). On June 19, 2000, WIPO also transmitted notification of the Complaint to the Complainant’s authorized representative via email.

On July 5, 2000, the Respondent submitted its Response to the Complaint via e-mail and courier to WIPO and the Complainant. On July 12, 2000, the Complainant submitted a Reply to Opposition to Complaint via e-mail and courier to WIPO and Respondent. On July 18, 2000, the Respondent submitted a Procedural Objection to Complainant’s Reply via e-mail and courier to WIPO and the Complainant.

On July 24, 2000, the Complainant and Respondent were notified by WIPO of the appointment of the undersigned sole panelist as the Administrative Panel (the "Panel") in this matter. WIPO notified the Panel that, absent exceptional circumstances, it would be required to forward its decision to WIPO by August 7, 2000.

On July 28, 2000, the Panel elected to allow the Respondent to file a second substantive brief, solely to respond to the Complainant’s second substantive brief. The Panel stipulated that the brief be submitted no later than five business days from July 28, 2000, and would render its award within ten working days of that submission. On August 4, 2000, Respondent submitted its second substantive brief via e-mail, courier, and facsimile to WIPO and Complainant.

The Panel has not received any requests from Complainant or Respondent regarding further submissions, waivers, or extensions of deadlines, and the Panel has not found it necessary to request any further information from the parties. The proceedings have been conducted in English.

Both parties have submitted voluminous amounts of facts in this dispute. The Panel seeks only to document key facts and assertions in chronological order for this award, and does not attempt to re-document all of the facts asserted in the motions filed.

In April 1985, the Complainant began business in Southern California as "The Chip Merchant." The Complainant sells computer memory and other computer-related hardware and software products directly to the public.

The Respondent, Blue Star Electronics, allegedly began business in Northern California the same year as "Performance Electronics." In 1992, Respondent allegedly began operating as "Memory World." The Respondent sells computer memory and computer chips directly to the public.

In July 1994, the Respondent placed a local newspaper advertisement calling itself "North County Chip Merchant." Complainant immediately objected to this use and asserted trademark rights in the name, and Respondent agreed to refrain from future use of the term "chip merchant" in advertising.

In March 1995, Respondent registered the domain name CHIPMERCHANT.COM and commenced business online as "Memory World."

In June 1996, Complainant registered the domain name THECHIPMERCHANT.COM and began operating online under its name.

In April 1997, Complainant discovered Respondent’s registration and use of the CHIPMERCHANT.COM domain name. In May 1997, Complainant sent an objection letter to Respondent requesting that the domain name not be used since Respondent was a direct competitor of Complainant, and that the name was being used to confuse the public as to the source of goods sold at the web site. Respondent refused to discontinue use of the domain name, but appeared amenable to negotiation.

At that time, Complainant was unable to seek redress from Network Solutions, because it did not have a federal trademark registration for its mark (a specific constraint imposed by the Dispute Policy in effect at that date). Complainant’s only other option would be to enter litigation. The Panel notes that at that time, trademark law involving domain names was unsettled and undeveloped.

In May 1997, the Complainant filed for a federal trademark registration of THE CHIP MERCHANT.

In May, June, and July 1997, contentious correspondence continued between the parties regarding the domain name and Respondent’s web site content at the name. In June 1997, the Respondent placed a small disclaimer on its web site, disavowing affiliation with Complainant.

Throughout 1997 and 1998, numerous documented instances of actual consumer confusion resulted from the Respondent’s use of the CHIPMERCHANT.COM domain name and other marketing practices (e.g., allegations that Respondent answered the phone "Chip Merchant" and affirmatively represented to customers that they were "The Chip Merchant"). Respondent and Complainant communicated several times during this period regarding these instances of confusion and attempted to negotiate an agreement regarding the domain name and the Respondent’s web site. No agreement was reached. Complainant unsuccessfully sought relief from Network Solutions several times.

In September 1998, Complainant’s trademark application for THE CHIP MERCHANT was granted, based on acquired distinctiveness in the name from use in commerce since 1985.

In November 1998, Respondent registered the domain name CHIPMERCHANT.NET.

In December 1998 and January 1999, Complainant provided further objections to Respondent in light of continued, documented instances of consumer confusion between the two parties as a result of Respondent’s use of the domain names. The Respondent refused to transfer the names to Complainant.

In April 1999, Respondent registered the domain name THECHIPMERCHANT.NET.

In November 1999, Complainant sent a letter to the Respondent objecting to its continued use of the CHIPMERCHANT.COM domain name, and the registration of the CHIPMERCHANT.NET and THECHIPMERCHANT.NET domain names.

Instances of consumer confusion resulting from the Respondent’s use of the three domain names and other marketing practices were documented by Complainant through early 2000.

A. Complainant

Complainant asserts it used THE CHIP MERCHANT mark extensively, exclusively, and continuously to identify its goods and services (selling computer memory and other computer-related hardware and software products) since 1985. It asserts that it has expended significant sums advertising its business in well-known national and international print media on a frequent basis, and has achieved great commercial success, with millions of dollars in sales in 1999.

Complainant asserts that it had already achieved great commercial success by the time the Respondent registered its several domain names as such. Given that, Complainant had developed common law rights in the mark prior to Respondent’s registration of the domain names. Complainant points to its federal trademark registration, for which the PTO concluded that Complainant’s mark has acquired distinctiveness. Complainant asserts that it has never acquiesced to Respondent’s use of the domain names.

The Complainant asserts that the domain names at issue are identical or confusingly similar to THE CHIP MERCHANT mark in which it has both common law and now registered trademark rights; that Respondent has no rights or legitimate interests in the domain names; and that Respondent intentionally registered and uses the domain names in bad faith in order to sell directly competing goods. Complainant also states that throughout the course of their communications, Respondent has made vague references about a willingness to sell the domain names to Complainant.

The Complainant alleges that the Respondent registered and is using the domain names for no reason other than to usurp the goodwill and reputation that Complainant has built in its mark, and that it is suffering great harm from the Respondent’s use of the domain names in combination with its marketing practices, as evidenced in numerous documented instances of consumer confusion. The Complainant submitted documented evidence that Respondent actively mislead consumers into believing that it was Complainant, through the use of the domain names at issue and statements made to those consumers. The Complainant asserts that Respondent knew of the Complainant and its directly competing business (from their communications in 1994) when Respondent registered all of the domain names.

The Complainant asserts that the only reason the Respondent uses the domain names is to divert consumers seeking the Complainant, and not because it is known as a "chip merchant" and not because it uses the term in a descriptive or generic sense.

B. Respondent

Respondent alleges that it has been known by the term "chip merchant" in a descriptive or colloquial generic sense, and has used the term internally and externally to identify itself, since it commenced business in 1985. Respondent alleges current sales at $500,000 annually from its web site operations.

Respondent alleges that Complainant has no rights in the term THE CHIP MERCHANT because the term is merely descriptive and/or generic. Respondent also alleges that Complainant’s federal trademark registration is invalid, because the term is descriptive, and because the PTO did not take into consideration the Respondent’s alleged concurrent use of the term.

Furthermore, the Respondent alleges that a federal lawsuit is the proper forum for the resolution of this dispute in light of Complainant’s lack of trademark rights and invalid registration, and that the Complainant is attempting to hijack Respondent’s legitimate business operation.

Paragraph 4(a) of the Policy instituted three elements that must be established by a complainant to merit a finding that a respondent has engaged in abusive domain name registration, and to obtain relief. These elements are that:

(i) respondent’s domain name is identical or confusingly similar to a trademark or service mark in which the Complainant has rights; and

(ii) respondent has no rights or legitimate interests in respect of the domain name; and

(iii) respondent’s domain name has been registered and is being used in bad faith.

Each of these three elements must be proved by a complainant to obtain relief. Paragraphs 4(b) and 4(c) of the Policy provide further nonexclusive criteria for determining whether the Registrant has engaged in abusive domain name registration with respect to subparagraphs 4(a)(ii) and 4(a)(iii).

A. Identity of Respondent’s Domain Name and Complainant’s Trademarks

Contrary to the Respondent’s assertions, this Panel finds that it does have jurisdiction over this dispute. The parties are bound by this administrative process by virtue of the domain name registration agreements with Network Solutions. Any prior proceedings brought by either party under different agreements and in different fora are irrelevant and not binding on this Panel.

This Panel is bound to determine whether the Respondent’s domain names are identical or confusingly similar to a trademark or service mark in which the Complainant has rights. Thus, the Panel must determine whether or not the Complainant has rights in the asserted mark. The Panel is allowed to examine all of the evidence submitted, including evidence of a presumptively valid U.S. federal trademark registration, in making its determination. If the Respondent does not agree with the jurisdiction conferred on this Panel, it is free to bring a proceeding in the U.S. Patent and Trademark Office to cancel the Complainant’s registration, and/or appeal its case in U.S. federal district court.

The Panel concludes that the Complainant has trademark rights in the term "THE CHIP MERCHANT." The Panel notes the decision of the U.S. Patent and Trademark Office to grant federal registration to Complainant in the mark based on a finding of acquired distinctiveness. The Panel will not second-guess the decision of this body.

The Panel also finds that as of the dates of the Respondent’s registrations of the domain names, the Complainant had trademark rights in the term "THE CHIP MERCHANT." The Complainant’s lack of a federal registration at these times did not prevent the Complainant from having strong common law trademark rights in the term based on use since 1985; evidence submitted by the Complainant regarding this matter was ultimately found persuasive by the PTO in its decision to grant trademark registration to the Complainant. The timing of Complainant’s registration is irrelevant.

The Panel finds that the Complainant’s long use of the mark in interstate commerce (15 years), combined with evidence of continuous significant sales and marketing efforts, created trademark rights in the term in the Complainant. Based on all the evidence submitted, the Panel finds that the mark had acquired distinctiveness long before any alleged use by the Respondent, thereby defeating the Respondent’s arguments that the mark should be considered descriptive and unprotectable.

Moreover, the Panel finds from the evidence submitted that the Respondent has no trademark rights in the term CHIP MERCHANT, or any claim to that term whatsoever. The Panel notes that the Respondent substantiated no use of the term at all, beyond the domain name uses at issue in this dispute. The Respondent submitted absolutely no evidence, beyond conclusory statements, that it had used the term to specifically identify itself or its goods apart from the naked use of the domain names during its entire existence. The Panel notes that use of a domain name does not create trademark rights in those domain names or trademark rights based on those names, without use of the domain names in a trademark sense. Such a conclusion can not be drawn from the evidence submitted. The Panel also notes that the use of the term as part of an email address, in very small type at the bottom of one advertisement, does not suffice to prove that the Respondent had rights in the term, or that it used the term continuously and sufficiently enough to identify itself such that any rights were created. The Panel can not conclude that the Respondent has any rights in the term, or that it has "concurrently used" the mark alongside the Complainant, such that Complainant’s rights should be restricted or nullified.

The Panel finds that for trademark purposes here the domain name THECHIPMERCHANT.NET is identical to the "THE CHIP MERCHANT" trademark in which the Complainant has rights. The Panel finds that the domain names CHIPMERCHANT.NET and CHIPMERCHANT.COM are virtually identical, and confusingly similar, to "THE CHIP MERCHANT" in which the Complainant has trademark rights. The absence of the article "THE" does not somehow lessen the virtually identical and confusingly similar nature of those domain names.

Thus, Panel finds for the Complainant on the first element, that Respondent’s domain names are identical or confusingly similar to a mark in which the Complainant has rights.

B. Respondent’s Rights or Legitimate Interests in the Domain Name

The Panel considers the nonexclusive list of factors found in Paragraph 4(c) of the Policy to determine whether the Respondent has rights or legitimate interests in the disputed domain names. The Panel finds that the Respondent has no rights or legitimate interests in the domain names.

The Panel finds that the Respondent has made an illegitimate use of the domain names, with the intent, for commercial gain, to misleadingly divert consumers seeking the Complainant. As noted previously, the Respondent had knowledge of the Complainant when it registered the domain names. Based on all the evidence submitted, the Panel can not fathom a reason for the Respondent to use these specific domain names that are virtually identical to the Complainant’s name, for a commercial website bearing its own name that bears no relation to the domain names. The only reason the Panel can surmise to explain the Respondent’s registration and use of the domain names would be to divert online consumers seeking one of its successful competitors, thereby trading on its goodwill and reputation.

The Panel further finds, based on all the evidence submitted, that the Respondent was not commonly known by the domain names. As noted previously, virtually no evidence was submitted to substantiate the claim that the Respondent was commonly known as "chip merchant." No advertising or promotional materials were submitted, save for one advertisement where the term was used as part of an e-mail address. No declarations of customers or third party vendors substantiate Respondent’s claim. Respondent’s web site clearly designates itself as "Memory World." The Panel finds the evidence that Respondent answered its phone as "chip merchant" persuasive not as evidence that it referred to itself as "the chip merchant", but as evidence that it attempted to deliberately cause consumers to believe that it was the Complainant.

The Panel also finds that the Respondent did not have any rights or legitimate interests in the three domain names in connection with a bona fide offering of goods before any notice of a dispute. As noted previously, the Respondent knew of the Complainant and its prior use when it registered the CHIPMERCHANT.COM domain name. Less than a year prior to its registration of that domain name, Complainant had sent Respondent a letter objecting to Respondent’s use of the term "chip merchant" in an advertisement; Respondent apparently agreed then to refrain from future use of the term. The Panel finds that the Respondent should have known that the Complainant would object to its registration and use of a domain name comprised of a term it had objected to less than a year earlier; thus, the Respondent can not claim that the commencement of its business under the domain name was "bona fide" or commenced before any notice of dispute.

The Panel similarly finds that the Respondent’s use of the CHIPMERCHANT.NET and THECHIPMERCHANT.NET domain names in connection with its business created no rights or legitimate interests in these names in the Respondent, because they were registered long after the Complainant made its objections to the CHIPMERCHANT.COM domain name known to the Respondent, and long after the Complainant registered and commenced business at THECHIPMERCHANT.COM domain name.

Thus, Panel finds for the Complainant on the second element, that Respondent has no rights or legitimate interests in respect of the domain names.

C. Respondent’s Registration and Use of the Domain Name

The Panel considers the nonexclusive list of factors found in Paragraph 4(b) of the Policy to determine whether the Respondent registered and used the disputed domain names in bad faith.

The Panel concludes from all of the evidence submitted that the Respondent registered and used all three domain names in bad faith. The Panel finds that the Respondent registered the CHIPMERCHANT.COM domain name in bad faith, because it had knowledge of a successful competitor specifically using that name already. The Panel can not discern a legitimate reason for Respondent to register and use this domain name, as opposed to "chipseller.com" or "chipvendor.com," when it knew that Complainant was operating a successful competing business as "THE CHIP MERCHANT." The Panel finds Respondent’s arguments that it used the term descriptively as shallow and far-reaching, and can not reasonably conclude that the Respondent had a good faith intent when it registered and began using the domain name. The Respondent should have adopted a domain name that was not virtually identical to the name of a known competitor.

This conclusion is further bolstered by the fact that Respondent has not provided any persuasive evidence that it used the term to identify itself in a descriptive sense in its advertising or on the web site found at the domain name. Indeed, the Respondent just identifies itself as "Memory World" and does not call itself a chip merchant, most likely because it knows that Complainant would rightfully object to its use of the term.

The Panel concludes that the Respondent registered and used the CHIPMERCHANT.COM domain name to disrupt the business of the Complainant, and intentionally attempted to attract, for commercial gain, online users to its web site by creating a likelihood of confusion with the Complainant’s mark as to the source, sponsorship, affiliation, or endorsement of its web site. The Panel finds the documented evidence of many instances of actual confusion very persuasive for the argument that Respondent was successful in unfairly diverting consumers seeking the Complainant to its own website. The Panel notes that it finds the Respondent’s disclaimer to be ineffective and disingenuous in light of its size, content, and placement on its web site.

The Panel finds it suspicious that Respondent uses the same web site content at MEMORYWORLD.NET and the three "CHIP MERCHANT" disputed domain names; the Panel wonders why the Respondent didn’t commence doing business using only the MEMORYWORLD.NET domain name, the most logical domain name for its business. The Panel believes that it uses all these domain names to capture a larger portion of online consumers: those seeking information about the Respondent, and those seeking information about the Complainant.

The Panel concludes that the Respondent registered and used CHIPMERCHANT.NET and THECHIPMERCHANT.NET domain names in bad faith. The domain names were registered well after the Complainant objected to the registration of the CHIPMERCHANT.COM domain name. Based on all the evidence submitted, the Panel can not surmise a good faith intent in the acts of registering and using these domain names. The Panel finds especially suspicious the registration of THECHIPMERCHANT.NET, in light of the Complainant’s established use of THECHIPMERCHANT.COM. The Panel finds this registration and use as further evidence of Respondent’s efforts to take a free ride on Complainant’s reputation and goodwill.

The Panel finds that the Respondent registered and used of all three of the disputed domain names in bad faith. Thus, Panel finds for the Complainant on the third element.

D. Reverse Domain Name Hijacking

The Panel finds that the Complainant has not engaged in reverse domain name hijacking. The Panel finds Complainant’s allegations to be made with legitimate basis and in good faith. The Respondent should not have adopted a domain name that constituted the name of a known competitor; thus, any damage it will suffer as a result of this award will be the result of its own making.

For the foregoing reasons, the Panel decides:

1. That the CHIPMERCHANT.NET, CHIPMERCHANT.COM, and THECHIPMERCHANT.NET domain names registered by the Respondent are identical or confusingly similar to the trademarks in which the Complainant has rights;
2. That the Respondent has no rights or legitimate interests with respect to the CHIPMERCHANT.NET, CHIPMERCHANT.COM, and THECHIPMERCHANT.NET domain names; and
3. The Respondent’s CHIPMERCHANT.NET, CHIPMERCHANT.COM, and THECHIPMERCHANT.NET domain names have been registered and are being used in bad faith.

Accordingly, pursuant to Paragraph 4(i) of the Policy, the Panel requires that the registration of the domain names CHIPMERCHANT.NET, CHIPMERCHANT.COM, and THECHIPMERCHANT.NET be transferred to the Complainant.

Sole Panelist

Dated: August 21, 2000