Court backs jury: No ill intent in Ala. dealership's use of rival store's name
A Florida Toyota dealership has lost another round in its bitter legal battles with an Alabama rival after a federal appeals court upheld a jury verdict in favor of the rival in their dispute about Internet sites.
A panel of the 11th Circuit Court of Appeals in Atlanta upheld the jury's finding that Eastern Shore Toyota in Daphne, Ala., while in violation of federal anti-cybersquatting law, had not acted in bad faith. Rather, the jury said, Eastern Shore had reasonably believed it was fair and legal to use Internet domain names with variations on the name "Bob Tyler Toyota" as part of its marketing strategy.
Bob Tyler Toyota in Pensacola, Fla., has asked the court for a new hearing. The store's lawsuit, filed in U.S. District Court, stemmed from Eastern Shore's 2009 contract with Internet marketing firm Advanced Dealer Services. The firm used a computer program to create microsites with names related to the car business, such as www.2009camry.com.
Within months, Eastern Shore owned about 4,000 sites, including 14 incorporating Bob Tyler Toyota's trademarks, such as www.bobtylerprices.com. That microsite, which listed Eastern Shore's phone number, showed a model that Bob Tyler Toyota sold and provided shoppers the means to enter their financial information and apply for credit.
Another site, www.bobtylertoyotaquotes.com, included a "vehicle quote application" where shoppers could enter personal information for a quote.
When a Toyota representative told Eastern Shore that Bob Tyler Toyota objected to the microsites, Eastern Shore President Shawn Esfahani immediately instructed Advanced Dealer Services to disable them. Bob Tyler Toyota's lawyers threatened to sue unless Eastern Shore surrendered the domain names and paid $250,000, later raised to a $1 million demand.
Esfahani canceled Advanced's contracts and accused the marketing firm of misleading him into believing that use of the domain names was legal.
Bob Tyler Toyota sued Eastern Shore for false advertising, trademark infringement, unfair competition and violation of the anti-cybersquatting provision of the Consumer Protection Act.
At trial, Bob Tyler Toyota did not prove economic damages. And U.S. District Judge Richard Smoak denied Bob Tyler Toyota injunctive relief because Eastern Shore had surrendered the domain names and there was no indication Eastern Shore intended future trademark infringement. The jury concluded that while Eastern Shore shouldn't have bought the Web addresses, Esfahani didn't know he was breaking the law and had reasonably believed that using the domain names was legal.
Where it stands: Appeals court upholds Florida jury's finding that while the law was broken, it wasn't done in bad faith. Florida store asks for a new hearing.
Lawyer: 'No damage'
Eastern Shore lawyer J. Nixon Daniel III of Pensacola said: "There was no damage to Bob Tyler Toyota and no benefit to Mr. Esfahani." The fact that the microsites with Bob Tyler Toyota's trademark generated only one hit indicates how short a period they were online, the ineffectiveness of the marketing strategy or both, he said.
The appeals court affirmed the trial results and said it had been up to the jury to decide whether Eastern Shore had acted in bad faith.
Bob Tyler Toyota's lawyer, Frank Herrera of Miami, said in a statement: "Several important and factual issues not consistent with the anti-cybersquatting laws are the basis of the new appeal. The decision could set future precedent and allow defendants to avoid liability by claiming ignorance of the law."
Appeals Judge Edward Carnes said there was no proof that Eastern Shore tried to sell the domain names or use them to extort money from Bob Tyler Toyota. He cited evidence that Eastern Shore had relied on its marketing expert's advice, promptly discontinued the microsites and surrendered the domain names.
The judge noted that the case "is not the only one between these parties or the sole indication of the bitterness between them."
Last year, an Alabama jury ordered Bob Tyler Toyota and its sales manager to pay the Iran-born Esfahani $7.5 million for slander after employees of Bob Tyler Toyota told customers that Esfahani was a terrorist and that Eastern Shore's profits supported terrorism. The employees had described Eastern Shore as "Taliban Toyota" and "Middle Eastern Toyota."
Bob Tyler Toyota's appeal in that case is pending in the Alabama Supreme Court. In a statement, the store called the award "outrageous" and said Esfahani did not prove the statements damaged him.
You can reach Eric Freedman at email@example.com.