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Verisign, Inc. v. Xyz.Com LLC

United States Court of Appeals, Fourth Circuit

February 8, 2017

VERISIGN, INC., Plaintiff - Appellant,
v.
XYZ.COM LLC; DANIEL NEGARI, Defendants-Appellees.

          Argued: October 27, 2016

         Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:14-cv-01749-CMH-MSN)

         ARGUED:

          Lisa Schiavo Blatt, ARNOLD & PORTER LLP, Washington, D.C., for Appellant.

          Derek Alan Newman, NEWMAN DU WORS LLP, Seattle, Washington, for Appellees.

         ON BRIEF:

          Ronald L. Johnston, Los Angeles, California, Robert N. Weiner, Robert A. DeRise, Elisabeth S. Theodore, ARNOLD & PORTER LLP, Washington, D.C., for Appellant.

          Before WYNN, FLOYD, and HARRIS, Circuit Judges.

          PAMELA HARRIS, CIRCUIT JUDGE.

         Plaintiff Verisign, Inc. is in the business of selling internet domain names and operates the popular .com and .net top-level domains. In 2014, a competitor arrived on the scene: Defendant XYZ.COM, LLC ("XYZ") launched ".xyz, " a new top-level domain, and began registering domain names ending in .xyz. As part of its marketing push, XYZ, along with its CEO Daniel Negari, made a series of statements touting the popularity of the .xyz domain and warning of a scarcity of desirable .com domain names. Verisign sued XYZ and Negari, alleging that those statements violated the Lanham Act's false advertising provisions.

         The district court granted summary judgment to XYZ, holding that Verisign could not establish the elements of a Lanham Act claim. We agree. As to XYZ's self-promoting statements, most of which concern its registration numbers, we hold that Verisign failed to produce the required evidence that it suffered an actual injury as a direct result of XYZ's conduct. Nor can Verisign establish, we hold, that XYZ's statements about the availability of suitable .com domain names were false or misleading statements of fact, as required for Lanham Act liability. Accordingly, we affirm the district court's grant of summary judgment.

         I.

         A.

         We begin with a brief overview of the domain name industry. A domain name is the string of characters in an Internet address. In the domain name "uscourts.gov, " for instance, the ".gov" element of the name is referred to as a top-level domain. Verisign is the exclusive operator of both the .com and .net top-level domains. It operates the .com registry, selling domain names to registrars who in turn sell those names to end users. Over 100 million .com domain names have been registered. Among these 100 million registered domain names are 96 percent of all dictionary words - from apple.com to zebra.com.

         The worldwide domain name system is overseen by the nonprofit Internet Corporation for Assigned Names and Numbers ("ICANN"). In the early 2000s, ICANN began to consider the introduction of new top-level domains, in order to enhance competition and consumer choice. In 2012, ICANN began to accept applications for new top-level domains, and by July 2015 it had approved nearly 700 of 1, 930 applications. XYZ, founded by Negari, was among the hundreds of applicants granted the right to operate a new top-level domain. XYZ launched ".xyz" in 2014.

         At the heart of this case are certain promotional efforts undertaken by XYZ to market its new .xyz domain. According to Verisign, a number of XYZ's activities crossed the line into false or misleading advertising, violating the Lanham Act and injuring Verisign's own business operations. The statements of which Verisign complains can be divided into two rough categories, which we describe in turn.

         First is a series of affirmative statements about .xyz, promoting .xyz's popularity and touting its high registration numbers. For instance, Negari wrote a post on XYZ's blog - titled ".xyz, the most used new gTLD [generic top-level domain] - Boooooooom!" - stating that ".xyz has received the most registrations of all new gTLDs with 447, 544 domains registered." J.A. 358. An XYZ employee later told a domain-name reseller that XYZ had over 600, 000 registrations. And XYZ also promoted its registration numbers in emails to individual registrars.

         By August 2015, XYZ had secured over one million .xyz registrations. Verisign does not contest that figure, nor the literal truth of the registration numbers advanced by XYZ. Indeed, it is not disputed that those numbers match statistics maintained in the "zone file, " a database tracking domain names registered in domain extensions. Rather, the crux of Verisign's claim is that XYZ's registration numbers are false or misleading because they include not only registrations bought and paid for by consumers - indicating actual consumer demand - but also 375, 000 .xyz registrations given away for free just after XYZ's 2014 launch, through an agreement between XYZ and Web.com.[1] By including those registrations in its numbers, Verisign contends, XYZ misrepresented actual consumer demand for its product.

         Negari also promoted the popularity of the .xyz domain in media interviews. During one such interview, Negari, along with other domain operators, spoke with National Public Radio ("NPR") as part of a story on the expansion of the top-level domain market. Introducing Negari, the NPR reporter said, "You could try to become the next .com, the next, all-purpose ending, the thing that you can stick on the back of any business name." J.A. 593 (emphasis added). The statement of which Verisign complains appeared after the interview, on the XYZ corporate blog: In a post titled ".xyz - the Next .com, " J.A. 596, XYZ promotes Negari's NPR interview and states that "NPR's [reporter] described .xyz as the next .com, " id. (emphasis added) - diverging, Verisign argues, from the actual formulation ("You could try to become the next .com") used by NPR. The post ends with a link to the full NPR interview. Id.

         In addition to promoting the XYZ domain with false statements, Verisign alleges, XYZ falsely disparaged Verisign's competing .com domain. Here, Verisign points to a series of statements by XYZ and Negari calling into question the availability of suitable .com domain names. First, during his interview with NPR, Negari, referring to the .com domain, said, "All of the good real estate is taken. The only thing that's left is something with a dash or maybe three dashes and a couple numbers in it." J.A. 593. A few months later, a Negari blog post on XYZ's website included this line: "Did you know that 99% of all registrar searches today result in a 'domain taken' page?" J.A. 628. (Negari echoed that claim in a subsequent radio interview, saying that "nine out of ten .com searches show up as unavailable." J.A. 666.) Finally, XYZ posted a 35-second advertisement to video-sharing website YouTube, comparing a new Audi with a .xyz license plate to a dilapidated ...


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