VeriSign, Inc. v. XYZ.COM LLC
848 F.3d 292
| 4th Cir. | 2017

Background

  • Verisign operates the .com and .net registries; XYZ launched the new .xyz gTLD in 2014 and aggressively marketed it.
  • XYZ and CEO Negari publicized large .xyz registration counts (drawn from zone-file data), including ~375,000 free registrations distributed via a Web.com promotion.
  • Verisign sued under the Lanham Act, alleging (a) XYZ’s self-promotional statements misrepresented consumer demand and (b) XYZ disparaged .com availability (e.g., “all of the good real estate is taken,” “99% of registrar searches result in ‘domain taken’”).
  • District court granted summary judgment for XYZ, finding failures on falsity, materiality, deception, and causation; it also excluded Verisign’s damages expert under Daubert.
  • The Fourth Circuit affirmed: held (1) Verisign lacked evidence of damages causally linked to XYZ’s registration‑number statements (expert excluded as unreliable), and (2) statements about .com availability were nonactionable opinion/puffery or literally true and not shown to be misleading by survey evidence.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether XYZ’s self‑promotional statements (registration counts, “next .com” claim) were actionable false advertising XYZ’s counts were misleading because they included free registrations and therefore misrepresented consumer demand; NPR claim suggested equivalence to .com Counts are literally true (zone file); no duty to exclude promotional giveaways; NPR wording is non‑actionable puffery or accurate in context Verisign failed to prove causation of damages from those statements; expert’s methodology excluded (correlation ≠ causation); summary judgment for XYZ affirmed
Whether statements about .com availability were false or misleading factual claims Statements (e.g., “all the good real estate is taken,” “99% searches show ‘taken’”) falsely disparaged .com and misled consumers Statements are opinion/puffery (subjective) or literally true (99% based on Verisign’s own data); no evidence consumers were actually misled Puffery/opinion for general claims; the 99% statistic is literally true and Verisign offered no consumer‑confusion survey on that claim; summary judgment for XYZ affirmed
Whether Verisign’s consumer survey supported deception/materiality Survey showed consumers interpret “registrations” as purchases and thus were misled by registration counts Survey did not test .com‑availability claims; limited to registration‑count statements and failed to prove materiality/deception for alleged harms Survey insufficient to show materiality/deception for availability claims; and did not cure causation gaps for damages
Whether Verisign proved cognizable Lanham Act injury (diversion of sales or lessening of goodwill) Lost registrations (particularly .net) and diminished goodwill flowed from XYZ’s advertising No reliable damages model tying lost sales to XYZ’s statements; no evidence of diminished goodwill beyond subjective assertion Verisign failed to prove actual damages causally linked to the challenged statements; expert excluded under Daubert; no admissible proof of lost goodwill

Key Cases Cited

  • Design Res., Inc. v. Leather Indus. of Am., 789 F.3d 495 (4th Cir. 2015) (sets Lanham Act five‑element framework)
  • PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111 (4th Cir. 2011) (plaintiff must prove damages causally linked to misrepresentation)
  • Xoom, Inc. v. Imageline, Inc., 323 F.3d 279 (4th Cir. 2003) (Lanham Act requires proof of actual damages and causal link)
  • Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014) (economic or reputational injury flowing directly from deception required for standing)
  • Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) (trial courts gatekeep expert testimony for relevance and reliability)
  • Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (Daubert gatekeeping applies to all expert testimony)
  • Scotts Co. v. United Indus. Corp., 315 F.3d 264 (4th Cir. 2002) (distinguishes literal falsity from implied misleadingness; surveys needed for latter)
  • Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 277 F.3d 489 (5th Cir. 2000) (defines puffery and nonactionable advertising exaggeration)
  • Am. Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387 (8th Cir. 2004) (statements of opinion and puffery are not actionable under Lanham Act)
  • Cooper v. Smith & Nephew, Inc., 259 F.3d 194 (4th Cir. 2001) (discusses Daubert standard for expert admissibility)
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