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INFORMATION SUPERHIGHWAY, INC. v. TALK AMERICA

July 30, 2003

INFORMATION SUPERHIGHWAY, INC., PLAINTIFF, AGAINST TALK AMERICA, INC. AND AMERICA ONLINE, INC., DEFENDANTS


The opinion of the court was delivered by: Robert Sweet, Senior District Judge [ Page 2]

OPINION

Defendants Talk America, Inc. ("Talk America") and America Online, Inc. ("AOL") have moved pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint of plaintiff Information Superhighway, Inc. ("ISI"), which alleges violations of the Lanham Act, 15 U.S.C. § 1125(a), New York General Business Law § 360-l, and common law unfair competition.

For the following reasons, the motion is denied.

Prior Proceedings

On November 1, 1999, ISI filed a suit entitled Information Superhighway v. Talk.com, Inc., 99 Civ. 10977 (S.D.N.Y.) (JGK). Talk.com, Inc. is the parent corporation of Talk America. That action alleged service mark infringement, unfair competition and service mark dilution. Several of ISI's service marks were mentioned in the complaint, including "telsave.com." The action was settled in April 2000. On April 6, 2000, the parties executed a release in which ISI relieved Talk.com, Inc. of liability for various claims, discussed below. Judge Koeltl signed the Consent Final Judgment and Permanent Injunction in the action on April 13, 2000. [ Page 3]

On March 21, 2003, ISI commenced this action by filing a complaint against Talk America and AOL, alleging that the defendants violated the Lanham Act, 15 U.S.C. § 1125(a), New York Business Law § 360-l, and common law unfair competition by using the registered mark Telsave, and the domain name "Telsave.com." ISI's initial complaint alleged that defendants had been improperly appropriating the Telsave domain name and keyword since 1998. On May 12, 2003, defendants moved to dismiss the complaint, primarily on the basis of a release executed by ISI on April 6, 2000 which precludes ISI from bringing certain claims against Talk.com, Inc. The release provided that ISI and its successors and assigns,

hereby fully and forever release, acquit and discharge Talk.com Inc., . . . and its officers, directors, principals, employees, agents, licensees, entities acting in concert with it, successors and assigns ("Releasees") from any and all claims, obligations and demands that have been asserted or could have been asserted by any of the Releasors against any of the Releasees relating to any use of, or any application to register or registration of, any trademark, service mark, trade name, Internet domain name or other source identifier consisting of or incorporating "Talkcom," "Talkcom.com," "Talk.com," "Talk," "TelSave," "Tel-Save," or any variation thereof or term confusingly similar thereto . . .
On May 16, 2003, ISI filed an Amended Complaint, making three changes to the initial complaint. First, ISI has dropped the allegation that the defendants had been misusing the "Telsave" domain name and mark since 1998. Second, the amended complaint now refers to the April 6, 2000 release. Third, ISI seeks relief based [ Page 4]

on the use of the Telsave domain name and mark only for the period after April 7, 2000.

On June 3, 2003, defendants moved to dismiss the Amended Complaint, arguing that the use of the "Telsave" mark was settled in the prior litigation, that the Release bars any claims by ISI relating to Telsave for the indefinite future, and that ISI has acquiesced in the Defendant's use of the Telsave mark. ISI filed opposition papers on June 16, 2003, and the defendants replied a day later. The motion was marked as submitted on June 18, 2003.

Facts

The following facts are drawn from ISI's complaint as befits a motion to dismiss and do not constitute findings of fact by the Court.

Plaintiff ISI is a reseller of long distance services. ISI owns the Internet domain name and mark "telsave.com," which it uses as a means of advertising and making available its services to volume telephone users. Defendant Talk America is also a reseller of long distance and other telephone services and is a direct competitor of ISI in the same market. Defendant AOL is the nation's largest internet service provider, with over 30, 000, 000 subscribers. AOL also owns a major stake in Talk America. [ Page 5]

AOL internet users may access web sites in one of two ways. First, a user can type in any domain name into the web browser. Second, a user may type in an AOL "keyword" (which may be more than one word), which will function as a shortcut to a given registered domain.

ISI alleges that from an unspecified date (perhaps as early as 1998) until March 10, 2003, AOL users that typed in the domain "telsave.com" or the keyword "Telsave" were diverted to the website of Talk America.*fn1 It was therefore not possible to reach ISI's web site by entering ...


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