Declining to rule on a request for a preliminary injunction against Voice Media, Inc., Trade News N.V., and Internet Business Services, a federal judge has sent a lawsuit by New Destiny Internet Group to arbitration, staying all legal proceedings in the suit pending the outcome of that arbitration.
The ruling also granted that co-plaintiff Xplor Media, the parent of Homegrown Video, was entitled to return to federal court when the New Destiny arbitration is completed. "[T]he relief sought by Xplor is so intertwined with the relief sought by New Destiny," wrote U.S. District Judge Consuelo B. Marshall, "that granting the relief would usurp the role of the arbitration to which New Destiny contracted."
"This ruling does not reflect at all on the merits," New Destiny chief Spike Goldberg said of Marhall's order, which was handed down June 4. "The court ordered New Destiny to arbitration. We only disputed this as to the copyright claim."
Goldberg said New Destiny agreed to arbitrate against all defendants if the court upheld the arbitration clause pertaining to VMI. He also disagreed with the part of the ruling staying action regarding Xplor pending the finish of New Destiny's arbitration, but said his company would review "what steps we will take in this regard."
But declining to rule and declining the injunction outright, Goldberg stressed, are two different things. "I believe the arbitrator should make this ruling," he said. "Indeed, at the hearing, the court stated that it was 'very likely' it would have granted the [temporary restraining order] and an injunction absent the arbitration provision."
In February, New Destiny and Xplor sued Voice Media, Trade News, and Internet Business Services, charging copyright and trademark infringement. The suit accuses VMI and Trade News of infringement involving copying Homegrown's Video Website Tour without Homegrown's direct permission, and IBS of contributory infringement because, according to a court filing, IBS "collect(s) income generated by Trade News' infringement as its agent, providing the market and environment for the infringement to thrive."
The suit also alleges breach of contract, breach of the implied covenant of good faith and fair dealing, violation of the Unfair Business Practices Act, and recision (cancellation of contract). Among other charges, the suit accused the defendants of sending traffic to other Websites with popups without reciprocating direction to New Destiny's site, creating other sites with content competing with New Destiny site content and sending traffic to the other sites, and co-mingling credit processing for New Destiny's account with other sites.
VMI chief Ron Levi said the lawsuit and subsequent bid for a temporary restraining order were "preposterous" because, as he told AVNOnline.com at the time, VMI had a deal with Homegrown and assigned the contract to Trade News, thus equaling no infringement.
The dispute centers around a Web marketing agreement between New Destiny and VMI in early 2000, in which a clause was included calling for binding arbitration "in the event of a dispute arising out of or in any way relating to" the deal. New Destiny "concedes that all of its claims against… VMI, with the exception of the copyright claim, are subject to this arbitration clause."
The defendants tried to argue that New Destiny and Xplor are "essentially interchangeable," with each plaintiffs' claim "intertwined with and dependent upon the [Web marketing agreement] arbitration clause," Marshall wrote, but she also noted New Destiny licensed a mark from Xplor while Xplor's prime business was adult video and DVD product as opposed to New Destiny's focus on the adult Internet.
"Aside from the very ambiguous contract language regarding Xplor, which was drafted by… VMI, there is no evidence to support requiring Xplor to arbitrate its claims against VMI or the other defendants."
VMI, Trade Media, and IBS filed a counterclaim in late March rejecting the infringement claims. An attorney for the three, Ira Rothken, said at the time the New Destiny/Xplor suit sprang from "hostilities" over CECash.com's decision to sign a license for Acacia Research Corp.'s Digital Media Transmission group of streaming media patents – now being challenged in court by a group of adult Internet companies led by New Destiny and Homegrown Video. Goldberg has held that the Acacia battle has nothing to do with this battle.
