August 24, 2001 09:19pm
Sex.com to Sue Yahoo for Intimidation Tactics
by: Kevin Featherly
(WASHINGTON DC) -- The owners of the Sex.com [http://Sex.com] Web site, threatened with a lawsuit by Yahoo [http://Yahoo.com] earlier this month for alleged cybersquatting and trademark violations, have decided instead to fire their own volley and sue the mega-portal first.
And today, the sex site's CEO tells Newsbytes, his company won't back off, even though Yahoo has since reconsidered and won't take legal action.
The rhubarb stems from an Aug. 2 letter sent by Yahoo senior attorney Laura H. Covington to Grant Media LLC [http://www.kfpllc.com], the company that owns and operates the Sex.com adult entertainment portal. The letter accused Sex.com of drawing users away from Yahoo through its use of a similar domain name, Yahoo.sex.com [http://yahoo.sex.com].
"In addition to tarnishing Yahoo's reputation by displaying and offering sexually explicit material at the Yahoo.sex.com site, your use of Yahoo as the third-level domain name is likely to cause the public to mistakenly believe that this site is connected with, sponsored by, or approved in some way by Yahoo," Covington wrote.
Thus, it "constitutes trademark infringement and unfair competition," she added.
The problem is, that's not what Sex.com was doing, or at least not intentionally. And on Thursday, after Grant Media filed a lawsuit seeking declaratory judgment that Sex.com did not illegally borrow Yahoo's domain name, Yahoo's attorney replied to the Sex.com operators, saying it was all a misunderstanding.
"We've reviewed the facts and claims asserted in the complaint and now have a better understanding of what Grant Media is doing," Covington wrote Thursday. "Yahoo ... confirms that it will not assert any claims against Grant Media for trademark infringement, false designation of origin, unfair competition, dilution or cybersquatting."
What Sex.com was doing was what some 80,000 other sites - including Gap.com [http://Gap.com], Infoseek.com [http://Infoseek.com] and NASCAR.com [http://NASCAR.com] -- do every day. They were utilizing the protocol known as "Wildcard DNS," which allows sites to bump users to their sites if the user types in any combination of words that ends in their ". Com" addresses. For instance, typing in "Newsbytes.sex.com," "Priesthood.sex.com" or "Amoeba.sex.com," or any other word, would bump users to the Sex.com site as well. The practice is perfectly legal.
Speaking to Newsbytes today, Yahoo spokeswoman Shannon Stubo admitted as much. "In this situation ... it turns out that it is not a legal-trademark infringement," Stubo said. "So we were in error in sending a cease-and-desist letter."
However, she added, "At the time, we did not know it was a Wildcard DNS
situation. Once we found that out, we sent the letter yesterday saying that we would not be pursuing claims against them."
Not good enough, says Grant Media CEO Gary Kremen.
"Why is that not good enough?" he said. "Because, really, their behavior is, 'Let's throw a grenade out there and hope they don't respond, and if they do respond, pull it back.' That's wrong. It's unfair business competition."
Kremen, working with a domain like Sex.com, is sitting on perhaps the single most lucrative possible Web address on the Internet, and Grant Media makes a fair bit of money off it. The site does not bother to produce its own expensive porn content; instead, it simply serves as a portal containing what presumably are very expensive banner ads that link users to other sex sites. And Kremen plans to spend some of that cash fighting Yahoo in court for using what he described as intimidation tactics.
"If it isn't me, they're going to go do it to some other small player," he said. "We're lucky. We happen to have lots of money."
With his suit, Kremen is poised to stir the pot on more charges than just the issue of intimidation. He said he will accuse Yahoo of carrying illegal hardcore sex content that his site wouldn't touch with a whoopee cushion. Yahoo is not supposed to have sex content on its pages. In April, under pressure from religious and family groups, Yahoo said it would remove adult merchandise and advertising from its U.S. Web sites. But there is still quite a bit of adult content and advertising to be found there, particularly in Yahoo's Clubs area. In its complaint, Grant points to one domain [http://clubs.yahoo.com/clubs/looklikeaminor], which is in a restricted area of the site) that uses a name he says is illegal in and of itself.
"Looks like a minor?" Kremen said. "You can't even say that legally."
He said he intends not only to go ahead with the suit, but also to expand it to a class-action case to include potentially every California citizen who has ever looked at illegal sex content on Yahoo. He cites a California law holding that to engage in an illegal business practice inherently translates to unfair business practice, if competitors refrain from doing something illegal.
"We're competitors," Kremen said, adding of Yahoo's initial cease-and-desist request, "It's the pot calling the kettle black."
As for carrying on the lawsuit, Yahoo's Stubo is mystified about what argument the company will take with it to court. "There has to be a controversy for a lawsuit to proceed," she said. "Because we are no longer pursing claims against Sex.com, a legal controversy no longer exists."
In addition to its request that the court declare Sex.com did not engage in trademark infringement, the Sex.com complaint also asks the court to declare it has not engaged in unfair competition; has not diluted the Yahoo trademark; and has not violated cybersquatting statutes. It also wants a judge to rule that any use of the word "Yahoo" in a domain name, whether intentional or accidental, is a matter of constitutionally protected free speech.
The complaint also seeks monetary damages to cover the costs of the suit, attorneys fees and "such other and further relief as the Court deems proper under the circumstances."