Free Response to Motion - District Court of Arizona - Arizona

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FENNEMORE CRAIG , P.C.
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FENNEMORE CRAIG, P.C. John D. Everroad (No. 002484) Ray K. Harris (No. 007408) Jamie A. Brown (No. 022830) 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Email: [email protected] Email: [email protected] Attorneys for Plaintiffs Rhino Sports, Inc. and John E. Shaffer UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Rhino Sports, Inc., an Arizona corporation; and John E. Shaffer, individually, Plaintiffs/Counterdefendants, v. Sport Court, Inc. a Delaware corporation, Defendant/Counterclaimant. Plaintiffs Rhino Sports, Inc. and John E. Shaffer (collectively "Rhino") oppose the Motion for Order to Show Cause Why Rhino Should Not be Held in Contempt To Enforce Injunction and for Sanctions ("Contempt Motion" or "Motion") filed by Connor Sport Court, successor to Sport Court, Inc. ("Sport Court"). Rhino has complied with the terms of the injunction. Rhino is filing simultaneously herewith a separate Motion to Modify the Terms of the Injunction. This response addresses only the merits of the Contempt Motion.1
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No. CV-02-1815-PHX- JAT RESPONSE TO MOTION FOR ORDER TO SHOW CAUSE

Rhino has also filed an Answer to the separate Complaint under which Sport Court seeks damages for the same conduct alleged in the Contempt Motion. The parties have agreed that the Complaint should be transferred to this Court by filing a joint motion to transfer

Case 2:02-cv-01815-JAT

Document 107

Filed 02/05/2007

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BACKGROUND Pursuant to a Settlement Agreement, this Court entered a permanent injunction on March 23, 2004. The injunction prohibited Rhino from using the mark SPORT COURT "in any ... media whatsoever, including, but not limited to, on or in connection with the Internet ... as a sponsored link, in connection with an Internet web page, or as HTML code for an Internet website in any manner, such as the title or keyword portion of a metatag, or otherwise." The Contempt Motion contends that Rhino violated the permanent injunction by "purchasing sponsored link advertising with the SPORT COURT mark." Motion, p. 5, l. 12-13. I. Rhino Has Not Used SPORT COURT The trigger for the Contempt Motion appears to be Movant's discovery that Rhino appeared on December 20, 20062 as a sponsored link on Google for a search using the terms "sport" and "court." 3 Motion, p. 6, l. 14; p. 7, l. 7. The Contempt Motion merely assumes that the Google sponsored link was based upon purchase of the ad words sport court together to trigger the Rhino sponsored link. The permanent injunction prohibits "using in commerce the mark SPORT COURT ... in any ... media whatsoever, including, but not limited to, or in connection with the Internet, such as ... as a sponsored link." The mark SPORT COURT does not appear in the Rhino sponsored link, which states: the case, which is currently assigned to Judge Bolton. 2 The Complaint attaches a Google printout dated December 5, 2006. This printout shows the same competitors listed as Sponsored Links in different order. Complaint, Ex. J. In the search attached to the Contempt Motion, Movant actually appears as the first sponsor. 3 Movant does not allege Google users are using the terms `"sport" and "court" as a trademark.

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Document 107- 2 - Filed 02/05/2007

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Rhino Courts Flooring www.rhinocourts.com custom design the backyard court today from the name you can trust! The injunction prohibits use of the mark SPORT COURT as a sponsored link (meaning in the text of the sponsored link), and Rhino complied with this interpretation of the injunction. Even if the injunction prohibited use of sport and court together as ad words, Rhino complied with this interpretation as well. In fact, Rhino did not purchase the words sport court together, as assumed by Movant.4 A third party vendor, Cybermark International, Inc. ("Cybermark") provides web and search engine optimization for Rhino. Cybermark purchased only the term courts. See Declaration of Kimberly Judd-Penne attached as Exhibit 1. Rhino and Cybermark were unaware that this purchase of the ad word courts caused Rhino's sponsored link to appear in a Google search for the terms Sport Court. Id. The use of the word sport on the Rhino website, which is not prohibited by the injunction, coupled with purchase of the ad word courts, which is also not prohibited by the injunction, apparently resulted in the search results attached to the Contempt Motion. These results do not reflect any violation of the permanent injunction. II. Rhino Has Acted in Good Faith In an effort to show recurring violations, the Contempt Motion references two previously resolved incidents concerning third party conduct.5 Rhino took the agreed upon actions to ensure the third party conduct would not recur. There is no basis for asserting contempt based on the letters exchanged under the procedure established in the
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The Google search used to generate Contempt Motion Ex. 10 did not limit the results to a search for the specific term sport court, which would be done by using the term in quotes (i.e., "sport court"). 5 The correspondence attached to the Motion to Compel shows these matters were addressed, but omits detail and documentation. If the Court has any question regarding these prior controversies, Rhino will provide additional detail and documentation.
Document 107- 3 - Filed 02/05/2007

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Settlement Agreement.

These matters are irrelevant, and the assertions made are

unsupported. Rhino exercised good faith in addressing these matters. The third party conduct asserted does not give rise to contempt by Rhino. First, in May 2005, Movants discovered that the words Multi-Sport Court were being used in Qwest Dex phone directories for the Scottsdale/Paradise Valley area and the online version thereof, as well as on the Yahoo directory website. Motion, Ex. 5. Rhino explained that its previous instructions to discontinue this usage in all Qwest directories had not been followed and that the usage would be discontinued as of September 2005. Motion, Ex. 6. The use on Yahoo involving sports court construction was also

discontinued. Id. Consequently, these third party uses were dealt with more than 16 months ago. Second, in March 2006, Movants again discovered third party use of the term multi-Sport Court in archived ads on the www.keyaccess.com domain (the website for Affluent Living Magazine) and for Rhino Sport business opportunities on

BestFranchiseOpportunitites.com (another third party website). Motion, Ex. 7. Rhino promptly explained that it was unaware of the outdated, archived material on third party websites. Rhino took steps to ensure the use would not occur again. The appearance of the terms Sports Court on the franchise website was due to a third-party ad agency. Rhino has continued to direct its advertising agencies not to use the terms sport and court together. Motion, Ex. 8. Consequently, this issue was dealt with approximately 8 months ago. The recurring allegations are not due to any willful violation of this Court's Order, but rather to the extensive use of the terms sport and court, both separately and together, in the industry in which both parties compete. Sport Court contributed to this result by

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Document 107- 4 - Filed 02/05/2007

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using a descriptive mark.6 Unrestricted Google searches for the terms sport or court yield millions of hits. A Google search for "sport court" yields approximately 500,000 hits. The cost of this Motion could have been avoided if Sport Court had approached Rhino with its concerns as it has done in the past rather than proceeding by sealed motion in an effort to gain a tactical litigation advantage. No prior notice of this alleged

infringement and claimed violation was given to Rhino before the Contempt Motion was filed. The specific allegation was not disclosed to Rhino until just before the January 17, 2007 status hearing as a result of the motion having been filed under seal. The search result of concern to Sport Court was not caused by a breach of the permanent injunction. Notwithstanding the absence of any breach, Rhino immediately took measures to ensure the third party vendor was not using the words sport and court together in its advertising, as it has in every instance. II. None of the Remedies Sought are Warranted Sport Court requests that the Court order Rhino (1) to pay Sport Court's reasonable attorneys' fees incurred in connection with its pursuit of the Contempt Motion; (2) to disgorge Rhino's profits from sales of recreational flooring products throughout the time it was in violation of the Order; and (3) to agree to liquidated damages of $5,000 a day. These remedies are unwarranted. First, there is no basis for an award of attorneys' fees where the Movant is not the prevailing party. In addition, Movant does not link a single transaction with any alleged violation by Rhino. It is undisputed that Rhino has complied with the permanent injunction since it was entered. The exorbitant damage claims reveal Movant's true motivation, which is to harass and inflict harm on a competitor. Movant's
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Consequently, the Settlement Agreement prohibits Sport Court from suing Rhino for the conduct of a Rhino dealer unless Sports Court has provided notice to Rhino andRhino has failed to follow these notice procedures. Settlement Agreement (Contempt Motion Ex. 3) ¶ 5. The Settlement Agreement also contemplates that Rhino should be entitled to use the words Sport Court generically "consistent with the use permitted by other competitors." Id. ¶ 2. See Rhino's Motion to Modify Injunction.
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rush to court without notice, without adequate investigation and ultimately without any legal basis is evidence of Movant's bad faith and should not be condoned. Indeed, in as much as the permanent injunction was entered pursuant to a contract, Rhino should be awarded its attorneys' fees as the prevailing party under A.R.S. § 12-341.01 RESPECTFULLY SUBMITTED this 5th day of February, 2007. FENNEMORE CRAIG, P.C.

By /s/Jamie A. Brown Ray K. Harris John D. Everroad Jamie A. Brown Attorneys for Plaintiffs Rhino Sports, Inc. and John E. Shaffer

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Document 107- 6 - Filed 02/05/2007

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FENNEMORE CRAIG , P.C.
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CERTIFICATE OF SERVICE I hereby certify that on February 5th, 2007, I electronically transmitted the attached document to the Clerk Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/EMF registrants: Daniel Paul Beeks: [email protected], [email protected], [email protected] Douglas F Behm: [email protected], [email protected] David W Dow: [email protected], [email protected] Christopher DC Hossack: [email protected] George Hamilton King: [email protected] I hereby certify that on February 6th, 2007, a true and correct copy of the attached document was sent via U.S. Mail, postage paid thereon, to the following parties, at the addresses listed: P Douglas Barr Stoll Keenon & Park LLP 300 W Vine St Ste 2100 Lexington, KY 40507 Arthur B Berger Mark M Bettilyon Ray Quinney & Nebeker PO Box 45385 Salt Lake City, UT 84145-0385 David L Stott Peter M de Jonge Thorpe North & Western LLP PO Box 1219 Sandy, UT 84091-1219

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Document 107- 7 - Filed 02/05/2007

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Robert M Wolesensky Sport Court Inc 701 Leander Dr Leander, TX 78641

/s/Michele A. Maul
PHX/1877589.2

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FENNEMORE CRAIG , P.C.
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Case 2:02-cv-01815-JAT

Document 107- 8 - Filed 02/05/2007

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