Submitted November 22, 2013.
[Copyrighted Material Omitted]
Appeal from United States District Court for the District of Nebraska - Omaha.
For Lovely Skin, Inc., Plaintiff - Appellant: Benjamin M. Belmont, LUSTGARTEN & ROBERTS, Omaha, NE; Bruce H. Brodkey, BRODKEY & CUDDIGAN, Omaha, NE; Matthew Thomas Furton, Daniel I. Schlessinger, LOCKE & LORD, Chicago, IL.
For Ishtar Skin Care Products, LLC, Defendant - Appellee: Matthew Scott Noren, John Patrick Passarelli, KUTAK & ROCK, Omaha, NE.
Before WOLLMAN, COLLOTON, and GRUENDER, Circuit Judges.
GRUENDER, Circuit Judge.
Lovely Skin, Inc. (" Lovely Skin" ) brought a four-count complaint against Ishtar Skin Care Products, LLC (" Ishtar" ), alleging trademark infringement and false designation of origin under the Lanham Act, and common law unfair competition and injury to business reputation in violation of Nebraska law. Ishtar counterclaimed, seeking cancellation of the registrations of Lovely Skin's two trademarks. After a bench trial, the district court canceled the registrations and entered judgment for Ishtar on all four counts of Lovely Skin's complaint. Lovely Skin appeals. For the reasons discussed below, we reverse the district court's judgment canceling Lovely Skin's trademark registrations and otherwise affirm its judgment in favor of Ishtar.
Lovely Skin was incorporated in Nebraska in 2003 and is owned by Dr. Joel Schlessinger, a dermatologist, and his wife Nancy Schlessinger. Lovely Skin retails cosmeceutical skin care products, which are cosmetics with pharmaceutical benefits. Lovely Skin carries both dermatologist-recommended, third-party skin care products and its own products under the brand name " Lovely Skin." These products range in price from approximately $3 to $400. Lovely Skin primarily sells the products through its website www.LovelySkin.com.
Starting in 2003, Lovely Skin began purchasing keywords from internet search engine companies to drive customers to its website. By purchasing keywords, Lovely Skin's website appeared toward the top of the search results web page when an internet user searched for any of the purchased keywords. Lovely Skin paid each search engine provider based on the number of users who, after searching for a keyword, then accessed its website. Currently, Lovely Skin purchases approximately 10,000 different keywords, including the names of its most well-known products. From 2003 to 2005, Lovely Skin spent more than $489,000 on keyword advertising, and from 2006 to 2007, Lovely Skin spent more than $577,000. Lovely Skin also advertised by distributing a catalog through the mail, purchasing print advertisements, and sending an electronic newsletter. In 2010, Lovely Skin retained Megan Driscoll, a public relations consultant, to garner national media coverage for its brand. As a result of this advertising and media coverage, Lovely Skin's revenue grew steadily: from approximately $300,000 in 2002, to $700,000 in 2003, to $5.1 million in 2005, and to $13 million in 2011.
Lovely Skin's website was originally operated by Dr. Schlessinger's medical practice, Skin Specialists. In 1999, Skin Specialists hired attorney Keith Green to file
applications to register its marks, LOVELYSKIN and LOVELYSKIN.COM. Green filed applications with the United States Patent and Trademark Office (" PTO" ) in 1999. However, the PTO refused to register either of the marks on the Principal Register because it determined that both marks were " merely descriptive." The marks were then placed on the Supplemental Register. In 2004, Lovely Skin hired Green to prepare and file an application to register the mark LOVELYSKIN on the Principal Register pursuant to § 2(f) of the Lanham Act, which permits merely descriptive marks to be registered if they have acquired distinctiveness. See 15 U.S.C. § 1052(f). Green delegated the task to Kristin Carnaby, an associate at his law office. In its application, Lovely Skin declared that its mark had " become distinctive of the goods/services through the applicant's substantially exclusive and continuous use in commerce for at least the five years immediately before the date of this statement." Green did not perform an investigation into whether Lovely Skin's use of the mark had been substantially exclusive, and neither he nor Carnaby can remember if Carnaby performed such an investigation. The PTO registered the trademark LOVELYSKIN and placed it on the Principal Register on September 20, 2005. In 2006, Lovely Skin applied to register LOVELYSKIN.COM, and in January 2007, an amendment was made to that application to add a claim that LOVELYSKIN.COM had acquired distinctiveness based on Lovely Skin's ownership of the registration for LOVELYSKIN. The PTO also registered LOVELYSKIN.COM and placed it on the Principal Register on June 19, 2007.
In March 2006, Lovely Skin became aware of the website, www.livelyskin.com, which sells many of the same products that Lovely Skin sells through its website. Ishtar, a California limited liability corporation owned by Sharokin Vardeh, registered www.livelyskin.com with internet domain registrar GoDaddy on November 14, 2005. At the time Ishtar registered its website, it was unaware of Lovely Skin or its website. Ishtar is a much smaller retailer than Lovely Skin and has earned approximately $2 million in total revenue between 2005 and 2010. Lovely Skin alleges that it experienced an instance of consumer confusion between Lovely Skin's and Ishtar's websites in March 2008, when a customer emailed Cathy Huftless, Lovely Skin's Director of Internet Sales. The customer was replying to an email she received from Lovely Skin when she attempted to send a copy of the email to Huftless at " Cathy@livelyskin.com." Dr. Schlessinger also claims that since 2009, Lovely Skin ...