DECISION

Verilux, Inc. v. Verilux Canada Corp.

Claim Number: FA0203000105946

PARTIES

Complainant is Verilux, Inc., Stamford, CT (“Complainant”) represented by Frank P. Presta, of Nixon & Vanderhye, P.C.  Respondent is Verilux Canada Corp., Toronto, ON (“Respondent”) represented by Alan Patte.

REGISTRAR AND DISPUTED DOMAIN NAME 

The domain name at issue is <verilux.com>, registered with Verisign - Network Solutions, Inc.

PANEL

The undersigned certifies that he has acted independently and impartially and to the best of his knowledge has no known conflict in serving as Panelist in this proceeding.

Honorable Charles A. Kuechenmeister (Ret.) is the Panelist.

PROCEDURAL HISTORY

Complainant submitted a Complaint to the National Arbitration Forum (“the Forum”) electronically on March 19, 2002; the Forum received a hard copy of the Complaint on March 22, 2002.

On March 20, 2002, Verisign - Network Solutions, Inc. confirmed by e-mail to the Forum that the domain name <verilux.com> is registered with Verisign - Network Solutions, Inc. and that the Respondent is the current registrant of the name.  Verisign - Network Solutions, Inc. has verified that Respondent is bound by the Verisign - Network Solutions, Inc. registration agreement and has thereby agreed to resolve domain-name disputes brought by third parties in accordance with ICANN’s Uniform Domain Name Dispute Resolution Policy (the “Policy”).

On March 22, 2002, a Notification of Complaint and Commencement of Administrative Proceeding (the “Commencement Notification”), setting a deadline of April 11, 2002 by which Respondent could file a Response to the Complaint, was transmitted to Respondent via e-mail, post and fax, to all entities and persons listed on Respondent’s registration as technical, administrative and billing contacts, and to postmaster@verilux.com by e-mail.

A timely Response was received and determined to be complete on April 11, 2002.

On April 16, 2002, Complainant timely filed an additional submittal.

On April 19, 2002, Respondent timely filed an additional submittal.

On April 19, 2002, pursuant to Complainant’s request to have the dispute decided by a single-member Panel, the Forum appointed Charles A. Kuechenmeister as Panelist.

RELIEF SOUGHT

Complainant requests that the domain name be transferred from Respondent to Complainant.

PARTIES’ CONTENTIONS

A.  Complainant

Complainant is the owner of U.S. Trademark Registration No. 695,669 dated April 5, 1960, and Canadian Registration No. TMA 455,971 dated March 22, 1996 for the mark VERILUX, covering lighting fixtures, lamps and electric lighting products.  Complainant first adopted the mark VERILUX and has used it continuously since 1959 for lighting fixtures, lamps and electric lighting products.

The domain name <verilux.com> was registered by Respondent on January 31, 1996 without the knowledge or permission of Complainant.

On January 1, 1995, Complainant entered into a Distribution Agreement with Respondent under which it granted Respondent the exclusive right to distribute the products of Complainant in Canada under the trademark VERILUX.

On September 17, 1996 Complainant and Respondent executed a Trademark License Agreement which provides among other things that Respondent must assign <verilux.com> to Complainant in the event that the Trademark License Agreement is terminated.

On June 15, 1998, Complainant notified Respondent in writing that it had elected to terminate the Distribution Agreement for material breach by Respondent.  On June 30, 1998, Complainant notified Respondent in writing of the termination of the Trademark License Agreement.

Respondent has refused to assign <verilux.com> to Complainant despite numerous requests by Complainant following termination of the Distribution and Trademark License Agreements.

Respondent has made no use of <verilux.com> from November 1999 to the present.

Respondent has no rights or legitimate interests in respect of <verilux.com> and has used and maintained the registration of this domain name in bad faith.

B.  Respondent

Respondent's domain name <verilux.com> is substantially identical to Complainant's registered U.S. and Canadian trademarks for VERILUX.

Respondent and Complainant entered into a Distribution Agreement effective January 1, 1995, whereby Complainant granted Respondent the sole and exclusive right to market, sell and distribute Verilux products in Canada.

Respondent caused <verilux.com> to be registered on January 31, 1996.  Complainant was aware of Respondent's plan to do so and to use the domain name <verilux.com> in connection with its sales of Verilux products in Canada.

About six weeks before it registered <verilux.com>, Respondent offered Complainant an opportunity to participate in the development of a combined U.S./Canada <verilux.com> website.  Complainant declined, but encouraged Respondent to proceed unilaterally at its cost.  Respondent did so, engaging a website developer to register <verilux.com> and to begin developing a website at that domain name.

After the <verilux.com> website was developed, Respondent, at Complainant's request, added a hotlink to connect <verilux.com> website visitors to Complainant's new website, under development, named <ergolight.com>.

In September 1996 Respondent and Complainant entered into a Trademark License Agreement providing, among other things, that Respondent must assign <verilux.com> to Complainant in the event of termination of the Trademark License Agreement.

In June of 1998 Complainant notified Respondent of the termination of the Distribution Agreement and the Trademark License Agreement.

Article 7.02 of the Distribution Agreement provides that any controversy or claim arising out of or relating to that Agreement, or the breach thereof, shall be settled by arbitration, in accordance with the arbitration rules of the Arbitration and Mediation Institute of Ontario, Inc., pursuant to the Arbitration Act.

Respondent disputes Complainant's right to terminate the Distribution and Trademark License Agreements.

Complainant cannot unilaterally terminate the two agreements by simply issuing a notice of termination, but must instead, if controversy or claim arises, which it has, submit the matter to binding arbitration in accordance with the Distribution Agreement.

There has been no final order from arbitration declaring Complainant's right to do so.  Until such order is issued, Respondent's obligation to transfer <verilux.com> to Complainant does not mature.

Respondent has not made use of the domain name <verilux.com> since July 1, 1999, for reasons relating primarily to cost, and its inability to obtain inventory from Complainant.  Respondent is ready, willing and able to resume use of the domain name as soon as Complainant resumes product supply.

Respondent independently developed its rights in respect of VERILUX in that on April 15, 1994, its principal secured the registration of its name, Verilux Canada Corporation, under the Canada Business Corporations Act.  Professional searches of corporate names and Canadian trademarks made at that time found no conflicts between that corporate name and others, or with existing Canadian trademarks.

Complainant did not secure its Canadian trademark for VERILUX until March of 1996, several months after Respondent registered <verilux.com>, and a month after Respondent had begun to develop its <verilux.com> website.

The <verilux.com> domain name was registered and the <verilux.com> website was developed for the bona fide offering of Verilux products in Canada pursuant to the Distribution Agreement.  As Respondent's rights to and use of the corporate name and domain name were exclusively for sales and marketing in Canada, Complainant's U.S. trademark for VERILUX was irrelevant.

Respondent invested considerable time, effort and expense in advertising and promoting the Verilux products, and the brand and company names throughout Canada and very clearly established itself to be commonly known by <verilux.com>.

Respondent's use of <verilux.com> was always fair and was not intended to divert customers and consumers away from Complainant or to tarnish or infringe upon Complainant's mark VERILUX.  Respondent's registration and use of <verilux.com> has never been in bad faith.  In fact, Respondent redirected many hundreds of inquiries received through <verilux.com> from consumers outside of Canada to Complainant.

In December 1997, Respondent learned that Complainant was marketing Verilux lamps in Canada in off-label packaging through another distributor.  When Respondent challenged Complainant on this practice being in violation of the Distribution Agreement, Complainant agreed to cease and desist from this practice, but did not do so.

In March or April 1998, Complainant initiated negotiations with Respondent to renegotiate the Distribution Agreement so as to remove the exclusive distributor provision.  Respondent's refusal to agree to this modification is in fact what prompted Complainant's purported termination of the Distribution Agreement and Trademark License Agreement.  Respondent denies that it breached either of these agreements.

Following Complainant's notice of termination of the Distribution and Trademark License Agreements, it has refused to sell its products in Canada through Respondent.

In January 1999, Complainant initiated arbitration proceedings before the Arbitration and Mediation Institute of Ontario, Inc. to determine a number of issues centered around Respondent's alleged breach of and Complainant's right to terminate the Distribution and Trademark License Agreements, and Respondent's obligation to assign <verilux.com> to Complainant (herein called the "Canadian arbitration").  Respondent filed a Statement of Defence and Counterclaim.  The Canadian arbitration remains outstanding and no judgment or order has issued from it.

C.  Additional Submissions

Complainant's additional submission asserts the following:  The purpose of the Trademark License Agreement was to clarify that the trademark VERILUX, the corporate name Verilux Canada Corporation and the domain name <verilux.com> were being used by Respondent under license from Complainant, and that those names would have to be surrendered to Complainant in the event that Agreement should terminate.  Also, the Canadian arbitration is no longer active.  An arbitrator was selected in October 1999, but the arbitration never took place because it was not pursued by either party.

Respondent's additional submission addresses Respondent's use of VERILUX on its own in Canada prior to the January 1995 Distribution Agreement.  It also reiterates that until some kind of order issues from the Canadian arbitration, Complainant's purported termination of the Distribution and Trademark License Agreements is without force or effect.  Further, while there has been no progress on the case since the arbitrator was appointed in October 1999, the arbitrator still has the file in an open status; it does not automatically close until or unless the parties agree.

On April 24, 2002, pursuant to Rule 12, Rules for Uniform Domain Name Dispute Resolution Policy, the Panel entered an order requesting Respondent to furnish a full copy of the Statement of Defence and Counterclaim it filed in the Canadian arbitration proceeding.  Respondent furnished the document as required on April 29, 2002.

FINDINGS AND DISCUSSION

Paragraph 15(a) of the Rules for Uniform Domain Name Dispute Resolution Policy (the “Rules”) instructs this Panel to “decide a complaint on the basis of the statements and documents submitted in accordance with the Policy, these Rules and any rules and principles of law that it deems applicable.”

Paragraph 4(a) of the Policy requires that the Complainant must prove each of the following three elements to obtain an order that a domain name should be cancelled or transferred:

(1) the domain name registered by the Respondent is identical or confusingly similar to a trademark or service mark in which the Complainant has rights;

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

(3) the domain name has been registered and is being used in bad faith.

Identical or Confusingly Similar  Policy ¶ 4(a)(i).

Complainant is the owner of U.S. Trademark Registration No. 695,669 dated April 5, 1960, and Canadian Registration No. TMA 455,971 dated March 22, 1996 for the mark VERILUX, covering lighting fixtures, lamps and electric lighting products.  Complainant first adopted the mark VERILUX in and has used it continuously since 1959 for those products.

The <verilux.com> domain name registered by Respondent is identical to Complainant’s VERILUX mark.  It incorporates the entirety of Complainant’s mark and merely adds the generic top-level domain name “.com.”  Pomellato S.p.A v. Tonetti, D2000-0493 (WIPO July 7, 2000) (<pomellato.com> is identical to Complainant’s mark because the generic top-level domain (gTLD) “.com” after the name POMELLATO is not relevant); Sporty's Farm L.L.C. vs. Sportsman's Market, Inc., [2000] USCA2 33; 202 F.3d 489 (2nd Cir. 2000) cert. denied, 530 U.S. 1262 (2000), ("For consumers to buy things or gather information on the Internet, they need an easy way to find particular companies or brand names. The most common method of locating an unknown domain name is simply to type in the company name or logo with the suffix .com.").

Respondent concedes that <verilux.com> is substantially identical to Complainant's mark VERILUX.  Response, §3.

Based upon the foregoing, the Panel finds and determines that <verilux.com> is identical or confusingly similar to the mark VERILUX, in which Complainant has rights.

Rights or Legitimate Interests  Policy ¶ 4(a)(ii).

Respondent asserts that it has some right or legitimate interest in the mark VERILUX and <verilux.com> independent of its distributor relationship with Complainant.  The Panel finds and determines that if any such right or interest existed prior to Respondent's execution of the Trademark License Agreement in September 1996, those rights and interests merged into and were thereafter governed by and subject to the terms of that Agreement.  See, Trademark License Agreement §6 ("[Respondent] acknowledges that the Trademark [VERILUX] and [others] are and will at all times be the property of [Complainant]").  Both parties acknowledge that Respondent is legally obligated to assign <verilux.com> to Complainant after termination of the Trademark License Agreement.  See, Trademark License Agreement §10. 

While the Trademark License Agreement requires Respondent to assign <verilux.com> to Complainant upon termination, it also authorizes Respondent to use VERILUX in <verilux.com> until such termination.  See, Trademark License Agreement §2.

The Distribution Agreement can be terminated for cause, consisting of winding-up or insolvency of a party, non-payment of amounts due, or material breach.  Otherwise it appears to have indefinite duration.  See, Distribution Agreement §6.01.

The Trademark License Agreement has the same term, termination and arbitration requirements as the Distribution Agreement.  See, Trademark License Agreement §7. 

Complainant asserts that it terminated the Distribution Agreement, and with it the Trademark License Agreement, for material breach by Respondent (lack of sales effort/results—See, Response, Index 8) on June 25, 1998.  Respondent asserts that any effort by Complainant to terminate the Distribution Agreement is subject to the mandatory binding arbitration provisions of Section 7.02 thereof, which, with the amendment agreed to by the parties in September 1996, reads as follows:

7.02 Arbitration.  Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the arbitration rules of the Arbitration and Mediation Institute of Ontario pursuant to the Arbitration Act, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  The award rendered by the arbitrator or arbitrators shall be final and binding upon the parties hereto.

Respondent disputes Complainant's right to terminate the Distribution Agreement.  Because of this dispute, according to Respondent, there can be no termination of the Distribution Agreement or the Trademark License Agreement without judgment rendered from the Canadian arbitration process.  Until such judgment issues, asserts Respondent, the Trademark License Agreement is still in force, and Respondent has full right to maintain its registration and use of <verilux.com> in accordance with the terms of that Agreement.

Complainant initiated the Canadian arbitration in January of 1999.  Respondent shortly thereafter filed a Statement of Defense and Counterclaim, in which it seeks, inter alia, specific performance of the agreements and a declaration that Complainant's purported termination is without force or effect.  See, Defence and Counterclaim Para. 77.  According to both parties, an arbitrator was appointed in October of 1999, but no further proceedings have been held because neither party has pursued the same.  The parties disagree as to the effect of these facts, but according to the office manager of the Arbitration and Mediation Institute of Ontario, Inc., at least as of April 18, 2002 that agency still has the file as open.  It is "hanging" but "still active."  Apparently it will remain so unless the parties agree otherwise.  See, Respondent's Additional Submittal, p. 5.  Neither party offers an explanation for allowing the Canadian arbitration to languish for two and one-half years.

Nevertheless, the dispute between these parties over the domain name goes well beyond that.  It involves the breakdown of a commercial relationship founded upon written contracts, in which the parties accuse each other of significant breaches and other misconduct.  Resolution of their broader dispute will control the registration and use of <verilux.com>.  That dispute involves complex issues of contract interpretation and commercial reasonableness (alleged failure of sales efforts/results by Respondent, alleged misrepresentation in inducement to contract by Respondent, either party's ability to terminate the contracts unilaterally with or without cause, repudiation, Respondent's continued use of its corporate name, and, finally, disposition of the disputed domain name) and will require evidentiary hearings and legal interpretation.  See, Complainant's Notice of Arbitration attached as Index 17 to the Response, and Respondent's Statement of Defence and Counterclaim.  The parties' contracts, which absolutely control resolution of the domain name dispute, require them to resolve their dispute by arbitration.  A proceeding for that purpose, which specifically includes resolution of the domain name dispute, is pending in Ontario.  The parties are at issue there, and an arbitrator has been selected.

The Policy and the Rules for Uniform Domain Name Dispute Resolution Policy are not intended to cover domain name disputes in which both parties have some legitimate legal claim to the domain.  The ICANN dispute resolution procedure was consciously chosen to be "minimalist" in coverage.  ICANN intentionally chose to relegate domain name disputes between "legitimate" claimants to the courts and other dispute resolution proceedings.  4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, §25:74.2, at 25-194 & n.5 (20^th rel. 2001) ("The adopted policy establishes a streamlined, inexpensive administration dispute resolution procedure intended only for the relatively narrow class of cases of 'abusive registrations.')

Any right or legitimate interest of Respondent in <verilux.com> is inextricably entwined in the larger dispute between the parties arising out of their Distribution and Trademark License Agreements.  This UDRP proceeding is neither designed nor equipped to resolve those issues, and without the ability to do so it cannot resolve the matter of Respondent's right or legitimate interest in that domain.

The evidence before the Panel is insufficient to permit it to determine the relative rights and legitimate interests of the parties in <verilux.com>.  Accordingly, the Panel finds and determines that Complainant has failed to prove that Respondent has no right or legitimate interest in respect of the disputed domain name.

Registration And Use In Bad Faith  Policy ¶ 4(a)(iii).

Complainant asserts that Respondent registered <verilux.com> without its knowledge or approval.  Nevertheless Complainant did enter into the Trademark License Agreement, authorizing Respondent to maintain that registration and to use <verilux.com> for the purposes specified in the Distribution and Trademark License Agreements.

The real issue in this controversy, of course, is whether Respondent's continued registration of <verilux.com> following the purported termination of the Distribution and Trademark License Agreements is in bad faith.  Here again, the outcome depends entirely upon resolution of the larger contractual and commercial dispute between the parties, as discussed above under the heading "Rights or Legitimate Interests."

As to bad faith use, Respondent admits that it has not used <verilux.com> to represent Verilux products since July of 1999, approximately one year after Complainant purportedly terminated the Distribution and Trademark License Agreements.  Passive holding of a domain name may satisfy the requirements of paragraph 4(a)(iii) of the Policy.  DCI S.A. v. Link Commercial Corp., D2000-1232 (WIPO Dec. 7, 2000) (Respondent’s passive holding of the domain name satisfies the requirement of paragraph 4(a)(iii) of the Policy.)  In this case, however, Respondent asserts that its nonuse is attributable to Complainant's alleged failure to honor the Distribution Agreement.  If true, this allegation could justify temporary nonuse.  Resolving the contractual dispute, however, is beyond the scope of this proceeding.

Based upon the foregoing, the Panel finds and determines that Complainant has failed to prove that Respondent has registered and is using <verilux.com> in bad faith.

DECISION

Based upon the foregoing Findings and Discussion, the relief sought in the Complaint is denied.

Honorable Charles A. Kuechenmeister (Ret.)

Dated:  May 2, 2002

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