Internet Specialties v. Milon-Digiorgio ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
INTERNET SPECIALTIES WEST, INC., a 
California corporation,
Plaintiff-Appellee, No. 07-55087
v.  D.C. No.
MILON-DIGIORGIO ENTERPRISES, CV-05-03296-FMC
INC., a California corporation,
Defendant-Appellant.

INTERNET SPECIALTIES WEST, INC., a 
California corporation,
Plaintiff-Appellant,
No. 07-55199
v.
ISPWEST, a California company;  D.C. No.
CV-05-03296-FMC
MILON-DIGIORGIO ENTERPRISES INC.,
OPINION
a California corporation; ACEWEB
INTERNET, a California company,
Defendants-Appellees.

Appeal from the United States District Court
for the Central District of California
Florence-Marie Cooper, District Judge, Presiding
Argued and Submitted
September 8, 2008—Pasadena, California
Filed March 17, 2009
Before: Betty B. Fletcher, Andrew J. Kleinfeld, and
Johnnie B. Rawlinson, Circuit Judges.
3401
3402 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
Opinion by Judge B. Fletcher;
Dissent by Judge Kleinfeld
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3405
COUNSEL
William E. Lloyd, Jr., Law Office of William E. Lloyd, Bev-
erly Hills, California, for defendant-appellant Milon-
DiGiorgio Enterprises, Inc.
Jason H. Wilson, Willenken Wilson Loh & Lieb, LLP, Los
Angeles, California, for plaintiff-appellee Internet Specialties
West, Inc.
OPINION
B. FLETCHER, Circuit Judge:
Milon-Digiorgio Enterprises, Inc. (“MDE”) appeals the dis-
trict court’s grant of an injunction against any further use of
its registered domain name, “ISPWest.com.” MDE asserts
three challenges to the injunction: 1) that the jury’s finding of
trademark infringement, which gave rise to the injunction,
was the result of an improper jury instruction; 2) that the dis-
trict court erred in finding that the plaintiff’s claim was not
barred by laches; and 3) that the injunction is overbroad. We
find that each of these claims fails, and affirm the district
court’s grant of the injunction.
I. CHRONOLOGY
Internet Specialties West (“Internet Specialties”) and MDE
are both internet service providers offering substantially simi-
lar services, including internet access, e-mail, and web-
hosting. Internet Specialties uses the domain name “IS-
West.com”, which it registered in May of 1996. MDE uses
3406 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
the domain name “ISPWest.com”, which it registered in July
of 1998.
Internet Specialties became aware of ISPWest’s existence
in late 1998. At that time, the companies did not offer equal
services: Internet Specialties offered dial-up, DSL and T-1
internet access nationwide, whereas MDE offered only dial-
up internet access and only in southern California. Internet
Specialties’ CEO testified that his company was not con-
cerned about competition from MDE at that time, because it
did not offer DSL and because the general market for internet
technology start-ups was so volatile that most companies were
expected to go out of business.
MDE expanded to nation-wide service in 2002, and began
offering DSL in mid-2004. Both parties agree that the shift
from supplying dial-up to supplying DSL was a “natural and
gradual technological evolution” which was necessary for
MDE to stay in business. However, this evolution triggered
action by Internet Specialties. In 2005, after giving MDE a
cease-and-desist letter, Internet Specialties brought suit alleg-
ing that MDE’s use of the name “ISPWest” constituted trade-
mark infringement in violation of the Lanham Act, 15 U.S.C.
§ 1125(a)(1).1
The trial was bifurcated. In the first phase, the jury found
that MDE had infringed on Internet Specialties’ trademark,
1
Section 43(a) of the Lanham Act provides: “Any person who, on or in
connection with any goods or services, . . . uses in commerce any word,
term, name, symbol, or device, or any combination thereof, or any false
designation of origin, false or misleading description of fact, or false or
misleading representation of fact, which- (A) is likely to cause confusion,
or to cause mistake, or to deceive as to the affiliation, connection, or asso-
ciation of such person with another person, or as to the origin, sponsor-
ship, or approval of his or her goods, services, or commercial activities by
another person, . . . shall be liable in a civil action by any person who
believes that he or she is likely to be damaged by such act.” 15 U.S.C.
§ 1125(a)(1).
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3407
but found no damages from the infringement. In the second
phase, the district court ruled that MDE did not have a laches
defense to the action. Accordingly, the court issued an injunc-
tion against the use of the name ISPWest.
MDE moved for a new trial that the district court denied.
MDE appeals the jury’s findings, the district court’s findings,
and the scope of the injunction.
II. JURISDICTION
The district court had jurisdiction pursuant to 28 U.S.C.
§1331 and §1338. The district court entered its Judgment and
Permanent Injunction on November 14, 2006. The district
court denied MDE’s motion for a new trial on December 18,
2006. The Notice of Appeal was timely filed on January 17,
2007. This court has jurisdiction under 28 U.S.C. §1291.
III. ANALYSIS
A. Jury Instruction 18.15
First we consider MDE’s contention that jury instruction
18.15 was improper and prejudiced the jury in favor of Inter-
net Specialties on its trademark infringement claim. We
review de novo a district court’s statement of the law, but its
formulation of the instructions for abuse of discretion.
Medtronic, Inc. v. White, 526 F.3d 487, 493 (9th Cir. 2008)
(“We review de novo whether the instructions misstated the
law. We review a district court’s formulation of jury instruc-
tions in a civil case for abuse of discretion.”) (internal quota-
tion marks omitted). We hold that instruction 18.15 correctly
states the law and is appropriately formulated.
[1] Jury instruction 18.15 followed the Model Civil Instruc-
tions by identifying the elements of trademark infringement,
and by listing the eight Sleekcraft factors under the element
of likelihood of confusion. See, e.g., AMF Inc. v. Sleekcraft
3408 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
Boats, 599 F.2d 341 (9th Cir. 1979). After listing these fac-
tors, however, 18.15 departed from the Model Instructions by
stating the following:
In an Internet case such as this one, the law consid-
ers three of these factors to be of greatest impor-
tance: (i) similarity of plaintiff’s and defendant’s
mark; (ii) relatedness of services; and (iii) simulta-
neous use of the Internet as a marketing channel.
Therefore, if you find that the names “ISWest” and
“ISPWest” are confusingly similar, and that the ser-
vices offered by the plaintiff and defendant are
related, and that both the plaintiff and the defendant
use the Internet as a marketing channel, then you
should find that the plaintiff has proven there is a
likelihood of confusion as I have instructed you
unless you find that the remaining factors weigh
strongly in the defendant’s favor.
This instruction is an accurate reflection of the law of our cir-
cuit, which places greater import on the “Internet Troika” fac-
tors in internet cases. Interstellar Starship Svcs., Ltd. v. Epix,
Inc., 304 F.3d 936, 942 (9th Cir. 2002); GOTO.com, Inc. v.
Disney, 202 F.3d 1199, 1205 (9th Cir. 2000). The instruction
did not, as MDE contends, mislead the jury as to the source
of these factors; the phrase “three of these factors” clearly
refers to the eight Sleekcraft factors discussed immediately
prior to the sentence at issue. Finally, the phrase “as I have
instructed you”, taken in context, was not an attempt to direct
the jury to find for the plaintiff. Instead, it merely refers back
to the judge’s preceeding instructions on the likelihood of
confusion.
[2] Therefore, we reject MDE’s claim that jury instruction
18.15 was improper. Accordingly, we do not need to consider
Internet Specialties’ assertion that MDE failed to preserve this
issue for appeal.
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3409
B. Laches
[3] Next, we turn to whether the district court erred in
determining that laches did not bar Internet Specialties’ trade-
mark infringement claim. Laches is an equitable defense to
Lanham Act claims. GOTO.com, 202 F.3d at 1209. This
defense embodies the principle that a plaintiff cannot sit on
the knowledge that another company is using its trademark,
and then later come forward and seek to enforce its rights.
Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088,
1102-03 (9th Cir. 2004).
[4] The test for laches is two-fold: first, was the plaintiff’s
delay in bringing suit unreasonable? Second, was the defen-
dant prejudiced by the delay? Jarrow Formulas, Inc. v. Nutri-
tion Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002); Tillamook
Country Smoker, Inc. v. Tillamook County Creamery Associa-
tion, 465 F.3d 1102, 1108 (9th Cir. 2006). As to whether
Internet Specialties was diligent, we must first decide whether
it filed suit within the applicable four-year statute-of-
limitations period, thereby creating a presumption against
laches.2 See Jarrow, 304 F.3d at 835-36 (“If the Plaintiff filed
suit within the analogous limitations period, the strong pre-
sumption is that laches is inapplicable. However, if suit is
filed outside of the analogous limitations period, courts often
have presumed that laches is applicable.”) The parties dispute
the correct starting date for the laches period. The district
court found in favor of Internet Specialties, holding that the
period started in 2004 when MDE began offering DSL, rather
than in 1998 when Internet Specialties gained actual knowl-
edge of MDE’s existence.
2
“[A] laches determination is made with reference to the limitations
period for the analogous action at law.” Jarrow, 304 F.3d at 835. Neither
party disputes the imputation of the four-year limitations period from Cali-
fornia trademark infringement law, and we agree that this was the correct
period to use.
3410 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
There is an intracircuit conflict about the correct standard
of review for a district court’s determination of the starting
date for laches. In Jarrow, the appellate court reviewed the
laches determination as a whole, including the starting date,
under a clear error/abuse of discretion hybrid (discussed
below). 304 F.3d at 833-34; see also Grupo Gigante, 391 F.3d
at 1102 (applying hybrid review from Jarrow to entire laches
review). However, a more recent case held that a district
court’s decision on the narrow issue of the starting date is
reviewed de novo, while giving deference to the ultimate deci-
sion on whether laches applied. Tillamook, 465 F.3d at 1109
(“In an analogous circumstance, the question of when the stat-
ute of limitations begins to run for an action at law is
reviewed de novo. De novo review is thus appropriate here.”)
We need not resolve this inconsistency because we would
reach the same result under either standard of review.
[5] The limitations period for laches starts when the plain-
tiff “knew or should have known about its potential cause of
action.” Tillamook, 465 F.3d at 1108; see also Jarrow, 304
F.3d at 838. In this case, the potential cause of action was a
trademark infringement claim. The essence of such a claim
centers on the likelihood of confusion between two marks or
products. GOTO.com, Inc. v. Disney, 202 F.3d 1199, 1205
(9th Cir. 2000) (“The likelihood of confusion is the central
element of trademark infringement.”); Brookfield Communi-
cations, Inc. v. West Coast Entertainment Corp., 174 F.3d
1036, 1053 (9th Cir. 1999) (“The core element of trademark
infringement is the likelihood of confusion.”). Thus, the ques-
tion is when Internet Specialties knew or should have known
about the likelihood of confusion between its mark and
MDE’s mark.
[6] On this issue, we disagree with the district court. While
it is true that MDE did not offer DSL in 1998, both companies
did offer internet access, e-mail, and web hosting in the same
geographic area under remarkably similar names. A prudent
business person should recognize the likelihood of confusion
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3411
to consumers under such circumstances as existed in 1998.
Therefore, we find that the laches period started in 1998.
Accordingly, the presumption of laches does apply, because
Internet Specialties did not file suit until after the four-year
period had expired.
This, however, does not end the inquiry. We must still
decide whether laches precludes Internet Specialties’ claim,
bearing in mind the presumption in favor of laches. In our cir-
cuit, we apply a “hybrid” standard of review in this circum-
stance, reviewing de novo whether laches is a valid defense
to a particular action, but reviewing the district court’s appli-
cation of the laches factors for abuse of discretion. Jarrow,
304 F.3d at 834; Grupo Gigante, 391 F.3d at 1101; Tilla-
mook, 465 F.3d 1109.
[7] The district court appropriately applied the six “E-
Systems factors” in its laches review.3 We take issue only with
its decision regarding the second factor: plaintiff’s diligence
in enforcing its mark. Internet Specialties knew, or should
have known, about the likelihood of confusion between the
domain names “ISWest.com” and “ISPWest.com” in 1998. Its
argument that MDE “progressively encroached” on its market
when it shifted from offering dial-up access to DSL access is
without merit. Offering DSL was not an expansion into a new
market, but rather a natural growth of its existing business. “A
junior user’s growth of its existing business and the concomi-
tant increase in its use of the mark do not constitute progres-
sive encroachment.” Tillamook, 465 F.3d 1110. In Grupo
Gigante, we rejected a progressive encroachment argument
where the plaintiff knew of the potential conflict several years
3
The six factors are: “1) the strength and value of trademark rights
asserted; 2) plaintiff’s diligence in enforcing mark; 3) harm to senior user
if relief denied; 4) good faith ignorance by junior users; 5) competition
between senior and junior users; and 6) extent of harm suffered by junior
user because of senior user’s delay.” E-Systems, Inc. v. Monitek, Inc., 720
F.2d 604, 607 (9th Cir. 1983).
3412 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
before bringing suit; the fact that it chose to wait until the
conflict was actual, versus potential, was not an excuse and
did not constitute progressive encroachment. 391 F.3d at
1103. The same reasoning applies here. Internet Specialties
was not entitled to wait until MDE’s business grew large
enough to constitute a real threat, and then sue for trademark
infringement. Therefore, we find that the district court erred
in its conclusion that Internet Specialties was diligent, the sec-
ond E-Systems factor.
However, MDE must still satisfy the second prong of the
laches test: prejudice resulting from Internet Specialties’
unreasonable delay in bringing suit. See Jarrow, 304 F.3d at
839 (holding that after a finding of unreasonable delay, laches
would not apply unless defendant also demonstrated preju-
dice). The dissent views this as an open-and-shut case of prej-
udice, because MDE “continued to build a valuable business
around its trademark during the time that the plaintiff delayed
the exercise of its legal rights.” Dissent p. 3420, quoting
Grupo Gigante, 391 F.3d at 1105. The dissent would hold that
the expansion from 2,000 customers to 13,000 customers,
along with the accompanying sales and expenses, constitutes
prejudice. Dissent p. 3421.
[8] While we are sympathetic to MDE’s position, the mean-
ing of prejudice in this context is not so simple. “If this preju-
dice could consist merely of expenditures in promoting the
infringed name, then relief would have to be denied in practi-
cally every case of delay.” Tisch Hotels, Inc. v. Americana
Inn, Inc., 350 F.2d 609, 615 (7th Cir. 1965). Laches is meant
to protect an infringer whose efforts have been aimed at
“build[ing] a valuable business around its trademark” and “an
important reliance on the publicity of [its] mark.” 6 McCarthy
on Trademarks and Unfair Competition § 31:12 (citations
omitted) (emphases added). Therefore, we feel compelled to
analyze whether MDE’s claim of prejudice is based on
“mere[ ] expenditures in promoting the infringed name,”
Tisch Hotels, 350 F.2d at 615, or whether it is based on an
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3413
investment in the mark ISPWest as the identity of the business
in the minds of the public. See Jarrow, 304 F.3d 835-36 (find-
ing prejudice where had the plaintiff “filed suit sooner, [the
infringer] could have invested resources in an alternative
identity . . . in the minds of the public.”)
[9] We find that the district court’s opinion, to which we
owe some deference under the abuse of discretion standard,
answers this question. The district court held that MDE did
not demonstrate prejudice from Internet Specialties’ delay in
bringing suit, because MDE did not spend the time in the
interim developing brand recognition of its mark. The uncon-
tested evidence at trial showed that the vast majority of
MDE’s advertising took the form of “pay-per-click” adver-
tisements, through which potential customers are funneled to
MDE’s website based on their interest in a particular type of
service (i.e., internet services in Southern California). Such
advertising creates little to no brand awareness. Furthermore,
MDE typically did not even include the name ISPWest in the
pay-per-click advertisements.4 It is a simple premise that
MDE cannot create “public association” between ISPWest
and the company if it does not even use the ISPWest mark in
its most prevalent form of advertising.
It is true, as the dissent points out, that MDE’s customers
will be forced to change their e-mail addresses, and that now
13,000 people must change, as opposed to 2,000. However,
the district court found that MDE had not shown that it would
have to undertake significant advertising expenditures to
change its name at this juncture. To the contrary, the evidence
showed that MDE had successfully changed its name in the
past, that internet service providers frequently change their
names due to consolidations and mergers, and that the addi-
tional costs of registering a new domain name are minimal.
4
For example, in 7,592 Yahoo! pay-per-click ads, MDE only used the
name ISPWest 18 times.
3414 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
We do not think that our view of prejudice constitutes a
defiance of circuit precedent, as the dissent characterizes it.
Our laches cases have consistently included an analysis of
whether, during plaintiff’s delay in bringing suit, the infringer
developed an identity as a business based on its mark. For
instance, in Jarrow Formulas, plaintiff Jarrow challenged cer-
tain health claims on defendant Nutrition Now’s product, a
health supplement called PB8. Jarrow, 304 F.3d 829, 832.
Jarrow argued the health claims were false and misleading
advertising under the Lanham Act, but we held that Jarrow’s
suit was barred by laches. Our finding of prejudice expressly
rested on the public association that Nutrition Now had built
between the health claims and its product.
Nutrition Now has closely tied the challenged claims
to PB8 since initial distribution in 1985. Nutrition
Now has always prominently displayed the claims
on PB8’s product label. Nutrition Now has also used
the claims as a central part of its extensive marketing
campaign . . . At bottom, Nutrition Now has invested
enormous resources in trying PB8’s identity to the
challenged claims.
Id. at 839. Thus, Jarrow’s analysis of prejudice probed deeper
than simply whether Nutrition Now had spent money expand-
ing its business. We are compelled to do the same.
Similarly, our holding in Grupo Gigante was that a defen-
dant can show prejudice “by proving that it has continued to
build a valuable business around its trademark during the
time that the plaintiff delayed the exercise of its legal rights.”
391 F.3d at 1105, emphasis added. We found that the defen-
dant was prejudiced where it had operated two grocery stores,
with the infringing name prominently displayed at the
entrance, for four years after plaintiff discovered the infringe-
ment. Id. There is a significant difference between the public
association of a grocery store and its name, versus the public
association of MDE and ISPWest. A grocery store’s very
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3415
identity rests in its name. MDE failed to show at trial that its
identity had much at all to do with the mark ISPWest, inas-
much as MDE did not rely on its mark to attract customers.
[10] In conclusion, we find no error or abuse of discretion
in the district court’s finding that MDE was not prejudiced
within the meaning of a trademark infringement claim. Thus,
laches does not bar Internet Specialties lawsuit.
C. Scope of the Injunction
[11] Finally, we must decide whether the district court’s
injunction is overbroad. We review a district court’s grant or
denial of an injunction, as well as the scope of the injunction,
for abuse of discretion. E. & J. Gallo Winery v. Gallo Cattle
Co., 967 F.2d 1280, 1296 (9th Cir. 1992); Scott v. Pasadena
Unified School Dist., 306 F.3d 646, 653 (9th Cir. 2002).
Under the district court’s order, MDE is enjoined from:
[u]tilizing any of ISWest’s marks or any variation,
derivative, or shorthand notation thereof, or any
terms similar thereto, including ISPWest, in connec-
tion with any product or service, or sham products or
services, in any medium, which would give rise to a
likelihood of confusion as to the source of such
products or services.
MDE contends that even if it cannot use its mark to market
DSL services, it should not be prohibited from using it to mar-
ket its other services which did not prompt Internet Special-
ties’ lawsuit. We find the scope of the injunction appropriate.
The essence of trademark infringement is the likelihood of
confusion, and an injunction should be fashioned to prevent
just that.5 We find no abuse in the district court’s determina-
5
The likelihood of confusion to consumers is the critical factor in our
consideration of both laches and the breadth of the injunction. The public
3416 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
tion that, in order to avoid confusion to consumers, MDE
must abandon all use of the name “ISPWest.com.”
[12] A plaintiff seeking an injunction must establish that
the injunction is in the public interest. Winter v. NRDC, Inc.,
___ U.S. ___, 129 S. Ct. 365, 381-82 (2008), rev’g 518 F.3d
658 (9th Cir. 2008). The wording of the district court’s
injunction reflects the usual public interest concern in trade-
mark cases: avoiding confusion to consumers. The dissent
would hold that a second type of public interest — the burden
imposed on the public by the injunction — defeats this injunc-
tion. The dissent cites only to Winter, in which the Supreme
Court held that the public interest in national security defeated
an injunction against certain Navy training excercises. Dissent
p. 3425, citing Winter, 129 S. Ct. at 377. We do not see a suf-
ficient similarity between the public interest in national secur-
ity and the particularized interest of MDE’s 13,000 customers
that would justify overturning this injunction on the grounds
that it burdens the public.
D. Conclusion
Since we affirm the district court’s findings in Internet Spe-
cialties’ favor, we do not reach the issues of unclean hands or
Internet Specialties’ cross appeal on its state law claim.
AFFIRMED.
has an interest in avoiding confusion between two companies’ products.
Even if a defendant can show unreasonable delay and prejudice, laches
will not apply to bar a suit if the public has an overriding interest in having
the suit proceed. Jarrow, 304 F.3d at 840. Were we to find that laches
applied, we would have to consider whether the public interest nonetheless
justified proceeding with the suit. Because we have concluded that laches
does not apply, we do not need to pursue this analysis.
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3417
KLEINFELD, Circuit Judge, dissenting:
I respectfully dissent.
“[E]quity aids the vigilant, not those who slumber on their
rights, or Vigilantibus non dormientibus, aequitas subvenit
. . . .”1
The majority opinion could have used what Learned Hand
wrote about prejudice, and left it at that:
[the plaintiff] did nothing; not a word of protest, or
gesture of complaint, escaped it for six years more;
and still [defendant’s business] kept increasing.
What equity it can have the hardihood now to assert;
how it can expect us to stifle a competition which
with complete complaisance, and even with active
encouragement, it has allowed for years to grow like
the mustard tree; why we should destroy a huge
business built up with its connivance and consent:
this we find it impossible to understand.2
I concur in most of the steps of the majority’s analysis, as
stated below. But when the majority gets to prejudice, the
majority defies circuit precedent,3 and for no equitable reason
that I can see. And when the majority reaches injunction law,
it defies Supreme Court precedent.4 We have now enunciated
1
John Norton Pomeroy, I A Treatise on Equity Jurisprudence, § 364 (2d
ed. 1899); see also Ricard v. Williams, 20 U.S. (7 Wheat.) 59, 116 (1822)
(Story, J.).
2
Dwinell-Wright Co. v. White House Milk Co.,132 F.2d 822, 825-26 (2d
Cir. 1943).
3
Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1105 (9th
Cir. 2004) (citing 5 McCarthy on Trademarks and Unfair Competition
§ 31:12 at 31-42 & n.4 (4th ed. 2002)); Jarrow Formulas, Inc. v. Nutrition
Now, Inc., 304 F.3d 829, 837-38 (9th Cir. 2002); Whittaker Corp. v.
Execuair Corp., 736 F.2d 1341, 1347 (9th Cir. 1984).
4
Winter v. NRDC, Inc., ___ U.S. ___, 129 S. Ct. 365, 381 (2008).
3418 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
a new and unfair standard for prejudice in trademark law. The
majority gives no good reason why.
The key, and new, holding is “[i]f this prejudice could con-
sist merely of expenditures in promoting the infringed name,
then relief would have to be denied in practically every case
of delay”5 applied in this case to a time period well in excess
of the analogous statute of limitations period (6 years com-
pared with 4) and exponential increases in business and
business-building expenses around a trademark (438%
increase in general business expenses and a 14,931% increase
in advertising expenditures). Notably, the language the major-
ity uses in its holding comes from a case where the delay was
less than a year,6 the infringement was deliberate,7 and in
which longer periods of delay were distinguished.8 The practi-
cal effect of this new rule is to eviscerate the defense of laches
in trademark law.
I. Facts
The critical dates in this case are 1998, when Internet Spe-
cialties West, Inc. (Internet Specialties) discovered that
Milon-DiGiorgio Enterprises, Inc. was using a domain name
similar to its own, and 2005, when it finally did something
about Milon DiGiorgio’s innocent infringement. Internet Spe-
cialties waited more than 6 years before writing a cease and
desist letter and then filing suit. No one contends that Milon-
DiGiorgio’s infringement was willful. The only willful deci-
sion was by Internet Specialties, who let things ride in the
hope that its competitor would go out of business.
5
Majority Op. at 3412 (quoting Tisch Hotels, Inc. v. Americana Inn,
Inc., 350 F.2d 609, 615 (7th Cir. 1965).
6
Tisch, 350 F.2d at 610 (the infringement was discovered late in 1960
and the defendants sent a cease and desist letter in August 1961).
7
Id. at 613, 615.
8
Id. at 615.
 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3419
When Internet Specialties discovered Milon-DiGiorgio’s
unwittingly infringing ISPWest domain name in 1998, ISP-
West had about 2,000 customers. In 2002, Internet Specialties
again had the infringement brought to its awareness. Someone
called Internet Specialties to collect on a bill thought to be
owed by ISPWest. Thus, Internet Specialties knew both that
ISPWest was infringing and, from this and a few other calls,
that the infringement caused confusion. Yet Internet Special-
ties still did not even trouble itself to send a cease and desist
letter to ISPWest.
In mid-2004, almost 6 years after Internet Specialties dis-
covered ISPWest’s infringement, ISPWest began offering
DSL service in addition to dialup, i.e., much faster upload and
download speeds. Internet Specialties found out. Still, no
action. Finally, a few months later, in 2005, Internet Special-
ties sent a cease and desist letter to ISPWest and filed this
lawsuit.
Internet Specialties’ first claim of infringement and demand
that ISPWest stop its activities was more than 6 years after
Internet Specialties knew that ISPWest was infringing on its
trademark. ISPWest had meanwhile grown from 2,000 cus-
tomers to 13,000, by dint of over $1.5 million in marketing
expenses.
II. Analysis
The majority opinion is correct up to the discussion of prej-
udice. We are agreed that: (1) jury instruction 18.15 was not
an abuse of discretion; (2) “[t]he limitations period for laches
starts ‘from the time that the plaintiff knew or should have
known about its potential cause of action;’ ”9 (3) the two com-
9
Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass’n,
465 F.3d 1102, 1108 (9th Cir. 2006) (quoting ProFitness Phys. Therapy
Ctr. v. Pro-Fit Orthopedic and Sports Phys. Therapy P.C., 314 F.3d 62,
70 (2d Cir. 2002)).
3420 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
panies offered similar enough services that Internet Special-
ties should have recognized the likelihood of confusion in
1998, when it became aware that ISPWest was providing
Internet access, e-mail, and web-hosting; (4) Internet Special-
ties’ progressive encroachment argument is foreclosed by
Grupo Gigante S.A. de C.V. v. Dallo & Co.10 and Tillamook
Country Smoker, Inc. v. Tillamook County Creamery
Association11 because they were not entitled to wait until ISP-
West’s business grew large enough to constitute a real threat
to Internet Specialties; (5) Internet Specialties was not diligent;12
(6) Internet Specialties did not file suit within the analogous
4-year statute of limitations period and therefore, a presump-
tion in favor of laches applies;13 and (7) Internet Specialties’
delay in bringing suit was unreasonable, so laches bars equita-
ble remedies unless there was no prejudice to ISPWest as a
result of the delay.14
We part ways on prejudice and on the majority’s affir-
mance of the injunction.
A. Laches
Ninth Circuit law, and the law of our sister circuits, has
long held that prejudice is established when the party assert-
ing laches “prov[es] that it has continued to build a valuable
business around its trademark during the time that the plaintiff
delayed the exercise of its legal rights.”15 That was proved
10
391 F.3d 1088, 1103 (9th Cir. 2004).
11
465 F.3d at 1110.
12
See id; Grupo Gigante, 391 F.3d at 1103.
13
Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.2d 829, 835-36
(9th Cir. 2002).
14
Id. at 838.
15
Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1105 (9th
Cir. 2004) (citing 5 McCarthy on Trademarks and Unfair Competition
§ 31:12 at 31-42 & n.4 (4th ed. 2002)); see also, e.g., Whittaker Corp. v.
Execuair Corp., 736 F.2d 1341, 1347 (9th Cir. 1984) (detrimental reliance
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3421
here. In 1998, ISPWest had 2,000 customers. In 2004, it had
13,000. In 1998, ISPWest had $518,848 in sales. In 2004, it
had $2,422,463 in sales. At the heart of this expansion was the
use of the trademark, ISPWest. Customers received “@isp-
west” e-mail addresses and used the ISPWest domain name.
All this expansion happened while Internet Specialties knew
about the infringement and did nothing to stop it. Until today,
ISPWest’s five or sixfold expansion of its business would
have been more than enough to establish prejudice.
As the majority concedes, Jarrow Formulas, Inc. v. Nutri-
tion Now, Inc., establishes that laches is presumed to bar a
claim made outside of the analogous limitations period, 4
years here.16 The district court did not apply this presumption
because, as the majority holds, it failed to determine the
proper period for laches.17 In fact, the district court applied a
presumption against laches. Accordingly, the district court
necessarily committed an abuse of discretion on this issue,
and we cannot properly defer to its discretion. The majority’s
deferential review is erroneous.
We extensively considered laches in Grupo Gigante, a
trademark case in which the plaintiff’s delay was only 4
years, not 6 as in the case at bar.18 We held that prejudice is
found in merely continuing a business, “incurring additional potential lia-
bility” by reason of the plaintiff’s delay); Hylo Co. v. Jean Patou, Inc.,
215 F.2d 282, 284 (C.C.P.A. 1954); Anheuser-Busch, Inc. v. Du Bois
Brewing Co., 175 F.2d 370, 375 (3d Cir. 1949) (prejudice established by
defendant’s advertising expenses and local goodwill); Pro-Football, Inc.
v. Harjou, 284 F. Supp. 2d 96, 143 (D.D.C. 2003) (“[P]rejudice is equated
with investment in the trademark that theoretically could have been
diverted elsewhere had the suit been brought sooner.”), remanded on an
alternative ground Pro-Football, Inc. v. Harjo 415 F.3d 44 (D.C. Cir.
2005); Haviland & Co. v. Johann Haviland China Corp., 269 F. Supp.
928, 956 (S.D.N.Y. 1967).
16
304 F.3d 829, 835-36 (9th Cir. 2002).
17
Majority Op. at 3410-11.
18
Grupo Gigante, 391 F.3d at 1105.
3422 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
established (and was in that case) when the party asserting
laches “has continued to build a valuable business around its
trademark during the time that the plaintiff delayed the exer-
cise of its legal rights.”19 We are obligated to follow circuit
precedent, so this rule controls and resolves the case. We did
not require, in Grupo Gigante, “brand awareness” or “public
association.”20 Neither of those phrases appear in Grupo
Gigante’s discussion of prejudice. In the case at bar, the
majority mistakenly contends that we did require these things.
We held in Grupo Gigante that laches barred equitable
relief that would require the defendant to change the name on
its existing stores.21 First, we held that to obtain judicial
enforcement of a trademark, a plaintiff “must conduct an
effective policing effort”22 and “[a]t the very least, that effort
must involve actually contacting the alleged infringer about
its use of a trademark.”23 Internet Specialties chose not to con-
tact ISPWest during the 6 years that ISPWest developed its
business around its trademark. In Grupo Gigante, as in this
case, the larger firm gambled on the smaller firm’s failure, so
that it would not need to send a letter and deal with whatever
discussion might ensue. We held that “the plaintiff ‘cannot
simply wait without explanation to see how successful the
defendant’s business will be and then ask for an injunction to
take away the good will developed by defendant in the inter-
im.’ ”24 In other words, we should not cover the larger firm’s
losing bet.
19
Id. (citing 5 McCarthy on Trademarks and Unfair Competition
§ 31:12 at 31-42 & n.4 (4th ed. 2002)).
20
Majority Op. at 3413.
21
Grupo Gigante, 391 F.3d at 1105.
22
Id. at 1102 (citations omitted).
23
Id.
24
Id. at 1102-03 (quoting 5 McCarthy on Trademarks and Unfair Com-
petition § 31:14 at 31-50 (4th ed. 2002)).
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3423
Our express holding on prejudice in Grupo Gigante cannot
be reconciled with today’s majority opinion.25 The majority
argues that in Grupo Gigante, prejudice was established
because “[a] grocery store’s very identity rests in its name.”26
I am not sure what the majority means by “very identity.” The
majority seems to be saying the brand name of a grocery store
means more than the domain name of an Internet provider.
For most of us, the grocery store we use has more to do with
driving, parking, quality, selection, and price, than name. ISP-
West’s name appeared in their website address and custom-
ers’ e-mail addresses and did not require parking or fresh
tomatoes. A customer accesses ISPWest’s website by entering
the ISPWest domain name into their browser. A customer
sends and receives email by way of “@ISPWest.” No new
driving directions are needed if the grocery store changes its
name, but they are if ISPWest does. That ISPWest continued
to build a valuable business while Internet Specialties delayed
policing its mark for 6 years establishes prejudice under
Grupo Gigante.27
We likewise applied laches in E-Systems v. Monitek, Inc.,
where the defendant “incurred substantial advertising expen-
ditures and rapidly expanded its business.”28 In E-Systems, the
plaintiff sued the same year it discovered the infringement,29
but was barred by laches because of the 6-year delay from
when it should have known about the infringement, and the
infringer was expanding rapidly and incurring substantial
advertising expenses during those 6 years.30
25
Id. at 1105 (citing 5 McCarthy on Trademarks and Unfair Competi-
tion § 31:12 at 31-42 & n.4 (4th ed. 2002)).
26
Majority Op. at 3414-15.
27
Grupo Gigante, 391 F.3d at 1105.
28
720 F.2d 604, 607 (9th Cir. 1983).
29
Id. at 606.
30
Id.
3424 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
Where the presumption of prejudice applies, as it does in
this case and did in Jarrow, prejudice exists where an
infringer is “forced to abandon its long-term investment in its
presentation of [its product] to the public.”31 In Jarrow For-
mulas, we said that had the plaintiff “filed suit sooner, [the
infringer] could have invested its resources in an alternative
identity . . . in the minds of the public.”32 Likewise, had Inter-
net Specialties sent a letter to ISPWest when it knew of the
infringement, ISPWest would have had to deal with a name
change for only 2,000 customers, not 13,000, and could have
invested its resources in familiarizing the market and its cus-
tomers with a new name. Jarrow quotes with approval Sev-
enth Circuit language, that “investments to exploit [a market
position with respect to the product at issue] are sufficient
prejudice to warrant the application of laches.”33 Our deci-
sions in Tillamook and Whittaker Corp. v. Execuair Corp. are
to the same effect.34
The majority’s new doctrine, that “[i]f this prejudice could
consist merely of expenditures in promoting the infringed
name, then relief would have to be denied in practically every
case of delay,”35 cannot be reconciled with these cases or any
others. The majority’s only authority is a quote from a Sev-
enth Circuit case, Tisch Hotels, Inc. v. Americana Inn, Inc..36
Tisch expressly distinguished “prolonged and inexcusable”
delay,37 which we have in the case at bar. The delay in Tisch
was less than a year.38 And, unlike this case, Tisch involved
31
Jarrow, 304 F.2d at 840.
32
Id. at 839.
33
Id. (quoting Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 824 (7th
Cir. 1999)).
34
Tillamook, 465 F.3d at 1108; Whittaker Corp., 736 F.2d at 1347.
35
Majority Op. at 3412.
36
350 F.2d 609, 615 (7th Cir.1965).
37
Tisch, 350 F.2d at 615.
38
Id. at 610.
 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3425
“deliberate infringement,” where a cheaper hotel attempted to
foist itself off as a luxury hotel by using the luxury hotel’s
name.39 We would have also applied a presumption against
laches in that case, whereas we apply a presumption in favor
of laches here.40
Our authorities compel the conclusion that laches applies.
B. Injunctive relief
Even if laches did not bar the claim, the injunction would
be an abuse of discretion. Reversing our decision in Winter v.
Natural Resources Defense Council, Inc., the Supreme Court
held that “[a]n injunction is a matter of equitable discretion;
it does not follow from success on the merits as a matter of
course.”41 The Court held that a plaintiff seeking a preliminary
injunction, as with a permanent injunction, “must establish
. . . that an injunction is in the public interest.”42 The Court
quoted with approval a remark we had made in an earlier
panel decision in that case, which stayed the injunction
because “[t]he district court did not give serious consideration
to the public interest factor.”43
Likewise in this case, the district court failed to give any
consideration at all to the public interest. There are two differ-
ent public interests at play in this case. One is the usual one
in trademark law, avoidance of consumer confusion.44 That
interest has no force in this case, because we held in Jarrow
that the interest in avoiding confusion defeats an application
39
Id. at 610-11; 615.
40
Jarrow, 304 F.3d at 835-36.
41
Winter v. NRDC, Inc., ___ U.S. ___, 129 S. Ct. 365, 381 (2008), rev’g
518 F.3d 658 (9th Cir. 2008).
42
Id. at ___, Id.. at 374, 381-82.
43
Id. at __, Id. at 378 (quoting NRDC, Inc. v. Winter, 502 F.3d 859, 863
(9th Cir. 2007)).
44
See Jarrow, 304 F.3d at 841.
3426 INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO
of laches “only when the suit concerns allegations that the
product is harmful or otherwise a threat to public safety and
well being.”45 Accordingly, the majority’s emphasis on
“avoiding confusion to consumers” is inapplicable in this case.46
The second, and dispositive, public interest in this case is
the burden imposed on the public by the injunction.47 In this
case, the injunction directed at ISPWest imposed the burden
of changing e-mail addresses on 13,000 people. Probably tens
of thousands more, who had the ISPWest’s customers as cor-
respondents, were left with obsolete e-mail addresses in their
address books and mailing lists. The public has an interest in
not being burdened with difficulties caused by a long-standing
infringement it had nothing to do with. Failure to give that
public interest any consideration at all makes the injunction
an abuse of discretion. An injunction granted without consid-
eration of the public interest must be vacated under Winter.48
ISPWest’s growth from 2,000 customers to 13,000 custom-
ers occurred after Internet Specialties knew of the infringe-
ment but before the lawsuit. Had Internet Specialties
diligently pursued its claim, around 11,000 customers and
their many correspondents would not have come to rely on a
stable e-mail address from ISPWest. This burden on the pub-
lic is imposed not by the time a lawsuit takes,49 but rather by
Internet Specialties’ delay in bringing the lawsuit or even
writing a cease and desist letter. Thousands of individuals
ought not be required to alert family, friends, business con-
tacts, banks, listservs, and their online subscription providers
of a change in e-mail address, all because of Internet Special-
45
Id.
46
Majority Op. at 3416.
47
See Winter, ___ U.S. at ___, 129 S. Ct. at 377.
48
Id., at ___, 129 S.Ct. at 378-79.
49
See Jarrow, 304 F.3d at 839.
INTERNET SPECIALTIES WEST v. MILON-DIGIORGIO 3427
ties’ delay. An injunction without even weighing these bur-
dens on the innocent is an abuse of discretion.50
The majority’s evisceration of laches means that a big com-
pany can lurk in the tall grass while its little prey gradually
fattens itself by dint of great effort and expense. Then, when
the small competitor has succeeded, the big company can
shake it down for a cut of its hard-won success, or destroy the
name under which it innocently did business for years. That
is trademark law as protection racket, rather than trademark
law as prevention of consumer confusion.
50
Winter, ___ U.S. at ___, 129 S.Ct. at 381-82.