Seller files suit after $1.4M deal falls through.
Ad.com owner Marcos Guillen has filed a lawsuit against Directi and Skenzo for backing out of its auction purchase of Ad.com.
The sale caught mainstream attention when Skenzo bought the domain at Moniker’s TRAFFIC auction in Silicon Valley this past April for $1.4M. But immediately after the sale, issues started popping up.
The exact circumstances leading to the failed purchase are not clear, although they are apparently related to intellectual property rights. (Directi and Skenzo founder Divyank Turakhia has not yet responded to a request for comment. We’ll update this story when/if he comments.) The USPTO trademark database shows six pending trademarks for Ad.com. One of the trademarks was filed by an AOL company. The other five were filed by a company called AD.COM INTERACTIVE MEDIA, INC. The latter filed its trademarks after the landmark purchase and is claiming a first use in commerce date of 1993. [Update: to reiterate, none of the 6 trademarks have been approved. AOL’s application is for how it used Ad.com for its Advertising.com site. They submitted this specimen when filing. On August 14 the trademark examiner sent a non-final office action that the mark had not acquired distinctiveness. Given recent trademark cases such as Hotels.com, it’s doubtful that AOL’s application will be approved. Also, Ad.com has been offered for sale at previous Moniker auctions. AOL didn’t file for the trademark until after Ad.com was advertised for sale.]
Guillen filed the lawsuit in Los Angeles Superior Court for Breach of Contract. He is seeking $1.4M, prejudgment interest, and/or damages according to proof.
The lawsuit is unfortunate for all parties involved, including auction organizer Moniker and the domain industry as a whole. The sale made up the bulk of Moniker’s revenue from the auction including a fat $210,000 commission. The next highest sale was BottledWater.com at $45,000.
Sounds like Directi’s caught between a rock and a hard place.
Sounds like moving forward with the deal would mean getting sued by the trademark owners (including AOL) and not moving forward leads to them getting sued by Marcos Guillen.
I wonder if they’ve taken on the lesser evil 🙂
David J Castello says
The ramifications of this go way beyond Ad.com and Moniker.
Andrew Allemann says
David, I agree. Bad for industry, live domain auctions, etc. Beyond that, it also shows how someone can block a domain sale by filing a frivolous trademark. Let’s face it, none of these 6 trademarks have any basis. I’d be shocked if any of them are approved.
This is a big issue for the industry.
Domain Investor says
There has to be something we don’t know.
Because, Divyank really wanted the domain and he could afford to buy it.
Plus, he is an excellent marketeer and I understand he already had plans for the domain.
Jamie Parks says
The AD.com dispute is a landmark case that should concern domain owners every where. No telling who all will eventually end up being sued, nor how many suits will inevitably be filed.
$1.4MIL for AD.com is still a bargain – then again how much in legal fees is one willing to endure in order to maintain rights to use the domain. IMO, breach of contracts are usually quite defensible given proper presentation of the facts. Although I know very little about the evidence that will be presented in this case, it’s hard not to be with Divyank Turakhia on this one.
Divyank’s defense could be ‘Fraudulent Misrepresentation’. If there was in fact any existing trademarks on file with the USPTO for AD.com, then I believe the seller (as per Moniker’s Terms) had a duty to inform Moniker of this fact prior to listing the domain for sale.
Guillen needs to take a careful look at the role he played in the deal falling though. Lawsuits like this can get very ugly, very quickly and can waste a lot of time and money. Meanwhile AD.com’s AD revenues belong to someone… and Interactive Media or AOL apparently are vying to capture it. We’ll see who files suit next.
Marcos Guillen should rethink his lawsuit (failed sale) and seriously consider development. He could make a whole lot more than a couple million bucks with a name like AD.com.
Wonder where J. Berryhill stands on this one?
If they do end up being forced to buy the domain name, they have legally acknowledged the Ad.com trademarks, so it would now be even more difficult to avoid them.
BTW, how the hell did Ad.com get approved for a trademark?
How serious will future biddings be If he bids at another domain auction? No one would want to “run-up” the price of a name thinking to themselves it may “not be real”…
David J Castello says
Is the ICA on top of this? From the looks of it, they are going after a name that’s changing hands thus setting precedent by creating a legal “soft spot” for all future transactions. I’m hoping there is more to this story, but from first glance it seems as if some attorneys are getting real creative.
You bid, you buy.
That’s the rule I live by. They should have done their homework ahead of time.
You don’t win an auction, and then start researching the domain name afterwards…
I thought about that David. It would not be a stretch for attorneys to say that the creation or first registration date of the name doesn’t count anymore but when it “changed hands”.
What do you do if your company is the headliner sponsor of a conference no one cared about?
Bid up at least 1 sale to make an otherwise forgettable show worth watching. You can see the kid was caught up in the hype and had RS one his side blowing hot air up his ass.
This trademark BS just gave them a excuse to back out. I hope they are FORCED to close this sale and pay for the sellers legal costs plus interest.
You got the hype now pay the price.
Quantum Web Property Developers says
How in gods name is this not a due diligence issue?
I absolutely cannot believe that someone who’s swimming in the “Seven Figure Domain Pool” didn’t bother to check for active TMs (the Tms in question are active, right?) prior to outlaying over a million dollars. This makes absolutely no sense.
You can expect precedences on the issue of domain names and trademarks to be set in this case, that’s for sure. A particularly interesting one is the efficacy of a TM that involves a domain name, even though the TM holder may not own the name anymore.
Theoretically, couldn’t one trademark their premium domains, sell the names themselves then hold the buyer over a barrel for their eventual use, since you still own the trademark?
Tricky, tricky stuff here…
Andrew Allemann says
None of the trademarks have been approved yet. The AOL mark was filed for last year. On August 14, the examiner sent a notice that it still doesn’t believe the mark has acquired distinctiveness. It’s actually for the company Advertising.com. Advertising.com referred to itself as “Ad.com”, which is complete B.S. Here’s a link the the specimen they sent to USPTO.
The other five look like complete B.S., as they were filed for a month after the sale.
Ramiro Canales says
The word “ad” is highly generic and descriptive and it will be extremely difficult to prove distinctiveness. The “.com” has no relevance when reviewing a trademark application. A trademark may be issued for ad.com, BUT it will not be placed in the Principal Register. It will be place in the Supplemental Register to indicate it is a weak and descriptive mark. For example, law.com failed to make it to the Principal Register because it is highly descriptive of the goods it offers. Additionally, trademark rights do not translate to domain name rights under the UDRP. There are plenty of cases that hold that, e.g. southpole.com. A pending application for ad.com does not mean that the applicant has trademark rights in the domain name or category of services. Common law rights may be claimed, but a lot of evidence is needed to substantiate the claim. Finally, the recent court decision involving hotels.com will likely affect a trademark examiner’s analysis.
Bobby B says
What I want to know is who was this mystery second bidder . . . for that matter wasn’t there also a third bidder running with the pack at around $500k . . . So all these people involved in this sale didn’t have the brains to search uspto.gov before bidding or maybe they were the second bidder. The second bidder info is a key in all this mess.
Maybe someone can clear this up for me, this is a perfect thread to ask in.
Per been reading the examiner guidelines for domain trademarks (http://www.uspto.gov/web/offices/tac/notices/guide299.htm), not only is a generic bank.com explicitly not registerable for broad bank services, soft.com is not registerable for facial tissues. That’s something even more generic as an adjective, as you’d expect. The question is, as Elliot commented, how could ad.com get trademarked in the first place?
Ignoring that issue, if the buyer spends $300 and applies for the trademark on ad.com today, then develops an ad marketplace or magazine that matches what they entered in the TM registration, why would AOL or anyone else have a claim to it unless it covered their exact product/industry?
Ok, then one step further. What if the purpose of ad.com is branding for a new company for a product not trademarked under that term already (let’s say bird cages for example, nothing to do with advertising). How would a TM holder of any other “ad” or “ad.com” term have a chance at claiming it?
Ramiro Canales says
I reviewed the examiner’s letter. And, yes, she is not convinced that ad.com has acquired distinctiveness after five years of use in commerce. It appears that Advertising.com is attempting to “tack on” distinctiveness based on two trademark registrations of Advertising.com in different categories. “Tacking” distinctiveness is a whole other monster.
Aha, sorry, for some reason comments after #10 didn’t show up on initial reading. Now they’re there…bottom line is that none of the marks have been approved which appears to be in line with the guidelines.
Still seems like the TM issues would be in favor of the buyer, who knows.
Jamie Parks says
@John & @David – I have no doubt that David’s concerns (and yours) regarding any rulings that come of this case are shared by the ICA and many other domain investors abroad.
I own (2) .com domains that were ‘creatively’ trademarked after the date that I initially registered them. I’ve also been contacted by these ‘creativemark’ holders (not lawyers) informing me that if I ever try to sell the domain that they will be able to some how seize control over the domain following the sale.
It stinks – BAD…
There’s certainly some serious concerns that need to be worked out in situations like these. This is why I believe that the AD.com lawsuit(s) will be a landmark trial (if it gets that far) for trademark law, which could, as David mentioned, ‘create a legal soft spot’ for all future domain ownership transactions.
As I understand current law to be interpreted (which is always debatable and changable) trademark rights holders are limited to their rights of domain ownership for domains that were registered previous to their trademark’s approval.
Where these types of situations go gray is when the original registrant of the domain is directly contacted by the ‘late to the gate’ trademark holder. This to me is grounds for reverse domain name hijacking and should be frowned upon by both the legal and domain communities.
Unfortunately if Marcos went into this auction withholding knowledge of TM risk or previous correspondence expressed by a supposed AD.COM trademark holder, then by all means I feel the seller had a legal duty (as per Moniker terms) to disclose this information. One would expect that both the buyer (Directi) and Moniker had a right to know about these issues if they indeed existed.
I personally believe that contextual TM’s issued and approved by USPTO, that have exact instances in prior use as profitable web sites (including being parked, i.e. a web page with ads on it) should not be allowed issuance.
In essence, domain creation date should be indicative of ‘prior use’ and should outweigh and disallow trademark issuance by USPTO.
BTW, Domainmark.com is still available but the .net is taken 😉
The fake trademarks are not really the issue here. This is a generic domain name, a “prima facie case of genericness”, just like Hotels.com (http://legalblogwatch.typepad.com/legal_blog_watch/2009/07/at-last-we-know-hotel-is-generic.html). Those applications are not going anywhere and Skenzo knows it.
Going to T.R.A.F.F.I.C. and winning a biding war is all great fun, but when you make it back home you need to explain how you expended all that money. Making excuses about BS trademarks, being pressure or too much Dom Perignon will not cut it.
Ops, wrong link:
Great article, Andrew 🙂
I don’t get it. Why are there 6 tm apps in for ad.com from 6 people that don’t own ad.com and never have? Am I missing something here? Maybe I should go tm some generic domains that I don’t own. I’m seriously lost here.
I think Mr. Turakhia and Mr. Guillen should complete the sale. There is no way any trademark system, judge or anyone else could trademark such a generic term as “AD” in any non-specific way. Maybe the word “ad” on a door knocker but trademarking the word period. No way, it will never happen. imho. If it does the system is corrupt.
@David, great meeting with you and Michael at Domain Convergence last week. Killer info you both provided that I will be implementing. Thanks for coming to Canada!! Best.
Sounds very much like he got caught up in the heat and bid high. When I watched the video….I even said to myself….”He does not look like he really wanted to pay that price”. You can tell if you watch the bidding war video by his body language.
He had that smile on his face, and the thought in his mind: “I won! I won!….**** I won….Oh **** **** ****…. I did win….it’s okay…I’ll explain this to my company some how…..I will explain….**** I am so ****ed…okay SMILE for camera!”.
Dave Zan says
IIRC even Yahoo filed a TM application for Y.com, even though single-letter .coms (other than those luckily registered before) haven’t been approved for registration yet. Goes to show some people can when they have the time, money and effort to find a way.
Whether that’ll work or not, though, is an entirely different story. Unfortunately a judge who might not…might not…be that familiar with domain-trademark disputes might…might…side with the complainant.
Good luck to all parties concerned.
@ Dave Zan
Apples to oranges, Y.com was NOT at the time a valid domain name, big difference.
George Kirikos says
AOL just filed a suit against Advertise.com, too, see:
Stephen Douglas says
Ramiro here in his comments is right on. First of all, although I’m not an attorney, I’ve dealt with TM issues in past productions and creative and intellectual property.
The way a TM works is that the TM is not issued until it’s been in service BY THE FIRST USER WHO IS ACTIVELY PUBLICIZING THAT THE WORD/PHRASE is being TMed. The TM won’t be granted until it shows several “proofs”…
1) The TM name (or logo) is “distinctive”. In other words, if this word is used in common parlance, business, etc., then it can’t be TMed unless they can show a specific prodserv based solely on the TM branding outside common usage, and that TM has to serve only towards the specific prodservs within that spectrum.
2) After #1 is met, then the company applying for the TM has to use this “mark”, at least within their state or country, better still, globally, for five years without anyone contesting it.
Anyone trying to “TM” the word “AD” is barking up a stump, because there’s no tree there. It’s a common phrase, the domain should be bought by Div, and he should move forward in defending his new domain with confidence.
Oh, one more thing. I lost a TM lawsuit when someone stole the name of my live production company, ran events using my name, made money from using my name, but because I didn’t file the lawsuit within six months, the court ruled it was too late to “claim ownership” after the company who robbed me had already invested money and time in utilizing my name. Six months delay cost me millions of dollars. I was focused on other issues at the time.
Karma got them later, tho.
Please do not take my comments as legal advice, I am not an attorney. I’m only basing my comments on my own personal experience. Where’s Berryhill?
Chris Desouza says
This is no about a TM name. This is about folks indulging in a commodity they knew the ins and out about. These are folks who were supposed to be smart.
It was very clear Divyank went far higher than he wanted to or intended to. And then: silence. Doubt they ever intended to pay for it. Bad biz. One has to wonder if the shill bidder went too high and got stuck with the merchandise. JMHO
Sam Nunez says
Jamie, for Divyank to argue “Fraudulent Misrepresentation”, he would need to demonstrate that the seller not only misrepresented (the duty to inform there was a TM) but had the INTENT to induce reliance bc of the omission. Tough one.
He may opt to recover some $ via negligent misrepresentation…
Jamie Parks says
Looks like TechCrunch (along with many other news outlets) picked up your report Andrew. Maybe The Wall Street Journal will eventually run a piece. Too bad the exposure had to come by way of a TM issue. Hopefully everyone will see who the real culprit is in this deal.
A.mericas O.verreaching L.awyers
Matt, RS and DC are you guys suggesting that Mr. Thukaria should pay for the mistakes of Moniker and Mr. Guillen. Its the primary responsibility of Moniker to protect the interest of the buyer by doing adequate due diligence on the seller’s claims. After all what are they being paid for? It is the responsibility of the seller to indemnify buyer of any such issues as he has explicitly acknowledged non-existence of any such pending disputes on the domain he is selling. I think if one has to own the responsibility of settling this issue, it should be Moniker. If not, no buyer henceforth can ever trust any domain for sale on Moniker. It is rather funny to read that Moniker has filed a suite against Skenzo, after having failed to deliver their minimal responsibilities. I think someone should make them understand that if what they are eying for the commission they make out of this, they better deliver their duties first. No seller would go to Moniker if there are no buyers left. If they are any reasonable, I think, Moniker have to sue Mr. Guillen for non-disclosure/mis-representation.
Due diligence? Ad.com is a *generic* domain name, and as such is inherently protected from trademark claims, it can’t be trademarked. Moniker, Guillen, Thukaria and the USPTO would all agree on this. There was no valid trademark affecting Ad.com, and there would not be. What extra precautions would you suggest? They can’t ask for universal approval, the opinion of the USPTO should be enough.
But neither Moniker or Guillen can protect Mr. Thukaria from frivolous lawsuits.
Anybody can file a false claim for the price of a stamp. It is up to Mr. Thukaria to realize that the claim is unfounded, honor his word, and stand up against AOL.
The seller should make sure the domain name do not violate trademark.
In this case, it is the sellers problem.
The domain name does not violate any trademark. There is not a valid Ad.com trademark, and never will be, because of official USPTO policy. Generic domain names can’t be trademarked!!
Don’t you understand? AOL does not have a valid Ad.com trademark, they did apply for one, but it was never granted, and never will be.
Everything else are just excuses to avoid payment.
@DC “generic domains” with trademarks are possible. I can think of 3 right off the bat.
Adam, you are partially right, but you can’t trademark the .com part (see Hotels.com). Still, you could own a trademark using just the generic term, but only as long as the name is not related to the trademark category you are trying to use, ej. Amazon as a bookstore, Apple as a computer.
However, Ancestry.com doesn’t really own any ancestry related trademark. You can’t have a category killer like that and obtain a trademark on it’s relevant category, USPTO will not allow it.
So, again, you can’t trademark Ad.com. You could trademark ‘ad’ as something different, unrelated to advertisement, but that’s not the reason why they paid millions for category killers, is it?
Ancestry.com has 2 service mark trademarks . match.com has 4 different ones. CAN’T is debatable there’s all sorts of marks and I’m sure there are countless other examples.
You argument that you can’t trademark generic terms especially in the context of this discussion is even more ridiculous given that advertise.com and advertising.com both already have LIVE trademarks granted to them. . . Now what were you saying again ?
Service trademarks, Adam. Logos.
I think you are thinking of Word Mark
A service mark is used to identify a service rather than a product
what does it matter? both advertise.com and advertising.com have trademarks (as well as others mentioned) and you stated “Generic domain names can’t be trademarked!!”
The UDRP even recognizes service marks : “. . .domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights. . .”
You aren’t an attorney and neither am I . . . but I’ve presented fact, not conjecture.
DC, if the seller (Mr. Guillen) and/or the auction organizer are so sure about ad.com is free of any such issues, wouldn’t you think they should indemnify the buyer of any such pre-existing claims?
You are repeatedly asserting that USPTO will not allow such trademark (though adam has given counter cases) then, why is holding/pending the decision?
I hope you realize that you are stretching it for too much to support a baseless law suite of a seller who don’t want to honor his responsibilities.
Stephen Douglas says
@Jamie Parks – A.mericas O.verreaching L.awyers
That was SWEEEEET! (did you hire a comedy writer for that one, or did you pull that one up yourself? Either way, it made me laff because it was so on point! Good job broey)
Back to the issue at hand, I think some of these people dogging Moniker for not “representing outstanding TM issues” on Ad.com are not recognizing that AOL filed their TM lawsuit A DAY BEFORE THE AUCTION, if I’m reading the report correctly.
How can Moniker be aware of any TM issues if some bloated, desperate internet star with fading relevance files a lame and injurious TM lawsuit on a domain name they’ve never used, and has no “distinctive” qualities to give it a potential trademark? Whuuuuut?
Div and Directi should just pay for the domain and man up.