Lennar Pacific v. Morgan [1]

Michael Morgan is a real estate broker and consultant, who sold or placed under contract several homes in Lennar Pacific developments in Florida, and who also owned a home in one of Lennar's developments. He and Lennar became embroiled in a bitter dispute over the cancellation of number of housing contracts, and Morgan contended that Lennar owed him several hundred thousand dollars.

On June 5, 2006, during the course of this dispute, Morgan created a website -- www.defectivehomes.us -- which Morgan described as aimed at providing consumer information on defects in homes built by Lennar Corporation. Morgan apparently used the Lennar trademark in the metatags for the site. In emails to Lennar personnel shortly after the site's creation, Morgan drew attention to the new website, challenging the recipients to run a keyword search using the LENNAR mark, and making statements indicating that he might profit from the site ("You created a new business model for me.").

Morgan then registered a series of LENNAR-oriented domain names -- www.lennarhomes.info; www.lennarhome.info; www.lennar-homes.info; www.lennar-home.info; www.lenarhome.info; www.lenarhomes.info; www.lenarhomes.com. All of these domain names redirected users to Morgan's new primary website, www.lennar-homes.info, onto which he had moved most of the content from www.defectivehome.us.

Lennar initially filed suit in Florida state court in June 2006 for trademark infringement. Before that action was concluded, in April 2007, Lennar sued Morgan in federal court for trademark infringement and violations of the Anti-Cybersquatting Consumer Protection Act.

In May 2007, Morgan moved to dismiss or, in the alternative, to stay the federal action. Lennar then moved for a preliminary injunction to bar Morgan's use of its trademark. In July 2007, Morgan withdrew his motion to dismiss or stay and filed a motion for summary judgment.

On July 20, 2007, the magistrate judge issued his report and recommendations to the district court on Lennar's motion for a preliminary injunction. The report concluded that Morgan had violated the Anti-Cybersquatting Consumer Protection Act and committed trademark infringement. It recommended that the district court issue a preliminary injunction, barring Morgan from (1) using Lennar's marks or mispellings of its marks in domain names, (2) using Lennar's marks or mispellings of them in metags, sponsored links, or any type of paid advertising, and (3) infringing any of Lennar's marks.

The magistrate judge found that Morgan's websites were not "gripe sites," but rather sites that promoted his commercial interests and those of his sponsors. The report gave weight to the following facts:

• visitors to the website were encouraged to contact Morgan to engage his services in lodging complaints against home builders;
• visitors to the websites were encouraged to contact Morgan regarding his other businesses, including his real estate brokerage, real estate consultancy, and Internet marketing businesses;
• the websites solicited monetary contributions and provided links to the websites of various groups that solicited monetary contributions;
• the websites provided links to Universal Fastener Outsourcing and the American Society of Home Inspectors -- commercial websites related to construction defects;
• the websites provided links to commercial websites and websites in which commercial "banner" advertisements were displayed; and
• the websites provided links to the promotional websites of law firms endorsed by Morgan, in particular the website of "The Miller Law Firm," which Morgan endorsed as "highly recommended." Entire portions of The Miller Law Firm's website were reproduced on the sites.

The magistrate judge also drew attention to the fact that Morgan used "Internet search engine manipulation," including metatags and sponsored links, to divert users searching for Lennar's website to his websites. Finally, despite the fact that Morgan removed the content from those websites with Lennar-oriented domain names and cancelled the registration for them in April 2007, the court found that there was an ongoing risk that he would restore content to other websites and noted that there "exist any number of other potential domain names that are confusingly similar to the Lennar Marks available to [Morgan]."

The magistrate judge drew one especially questionable conclusion of law. He held that the "in connection with goods or services" requirement of Section 1114 of the Lanham Act (15 U.S.C. 1114(1)(a) [2]) "is not only met by use of the mark in connection with goods or services distributed or advertised by the alleged infringer; it may also be met by use in connection with the goods or services distributed by the trademark holder." This sweeping statement, if accepted by other courts, would bring almost any criticism of a plaintiff's goods or services on the Internet within the coverage of the Lanham Act. Luckily, this is not the law -- it is an overbroad statement of a minority view that has mostly been rejected by the courts. See, e.g., Bosley Med. Inst. v. Kremer, 403 F.3d 672, 679 (9th Cir. 2005) [3]. Moreover, this sweeping formulation was entirely unnecessary in light of the magistrate judge's factual findings that Morgan used his websites to encourage visitors to engage his services in lodging complaints against home builders, to contact him concerning his other business enterprises, and to promote the commercial activities of third parties of his choosing.

The district court did not get a chance to rule on the magistrate judge's report and recommendations because the parties settled out of court in August 2007 for an undisclosed sum. The federal and state actions have been voluntarily dismissed.