Facebook, Inc. v. OnLineNic Inc

Background

Facebook and Instagram alleged that ONLINENIC, ID Shield, and Xiamen 35.com Internet Technology Co., LTD (35.CN) were connected entities involved in registering, using, and trafficking in domain names that were identical or confusingly similar to plaintiffs’ trademarks. The second amended complaint asserted four federal trademark claims, including cybersquatting under the Anticybersquatting Consumer Protection Act, trademark infringement, false designation of origin, and trademark dilution.

The complaint alleged that ID Shield provided a domain-name privacy or proxy service for ONLINENIC’s customers and was listed as the registrant of the allegedly infringing domain names. It also alleged that 35.CN controlled, managed, and operated ONLINENIC and ID Shield. The court previously denied 35.CN’s motion to dismiss in its entirety, finding, among other things, serious factual questions concerning whether the entities were alter egos. An alter ego theory treats separate entities as effectively connected for certain legal purposes.

Motion and Arguments

35.CN moved under Federal Rule of Civil Procedure 42(b) to bifurcate the case, meaning to separate issues or claims for discovery or trial, and to stay discovery. It argued that discovery should first address what the parties called the “Proxy Service Issue”: whether ID Shield registered domain names for its customers as a proxy service or merely allowed its contact information to be used to protect customers’ privacy.

Under Rule 42(b), a court may order separate trials for convenience, to avoid prejudice, or to promote efficiency. The party seeking bifurcation bears the burden of showing that it is warranted. The court noted that bifurcation is the exception rather than the normal procedure.

Court’s Analysis

The court concluded that the Proxy Service Issue was not dispositive. Plaintiffs argued that at least some claims did not depend on whether ID Shield was a proxy service. They alleged that ID Shield directly violated the anticybersquatting law by registering infringing domain names and trafficking in them by licensing them to ONLINENIC or its customers.

The court explained that these claims depended on whether ID Shield was the registrant of the allegedly infringing domain names, rather than solely on whether it was a proxy service. The court was unpersuaded by 35.CN’s contrary argument, although it stated that defendants might prevail on these issues at summary judgment. The court found that 35.CN had not met its heavy burden to justify bifurcation.

The court also found that the parties needed to conduct additional discovery concerning the alter ego issue. That issue could affect both liability and jurisdiction, including 35.CN’s argument that the court lacked jurisdiction over it. In addition, plaintiffs had raised serious allegations that ID Shield and ONLINENIC had destroyed evidence. The court determined that additional discovery was needed to assess whether those allegations extended to 35.CN and what effect they might have.

Disposition

The court held that separating the discovery would not promote judicial efficiency or streamline the issues. Defendant 35.CN’s motion to bifurcate was DENIED in its entirety. Because the motion to bifurcate was denied, the requested stay was rendered moot and was also DENIED. The order was signed by United States District Judge Susan Illston on April 5, 2022.