IP Law Daily, TRADEMARK—D. Ariz.: Trademark, contract claims against GoDaddy by website security provider can proceed, (May 12, 2023)

By Linda O’Brien, J.D., LL.M.

The plain language of a stock purchase agreement between the parent company and an investment fund, along with sworn testimony, showed there was no assignment of claims by the parent’s subsidiary.

In a trademark infringement and breach of contract suit by a website security service provider against website host GoDaddy.com, the provider established that there was no assignment of its claims when its parent company was acquired by an investment fund, the federal district court in Phoenix, Arizona has ruled. The parties did not dispute that the plaintiff had standing to pursue its claims unless those claims had been assigned to a third party. Thus, the defendant’s motion to dismiss was denied (SiteLock LLC v. GoDaddy.com LLC, May 10, 2023, Lanza, D.).

GoDaddy.com provides various website-related services to customers around the world, including domain registration and web hosting. SiteLock offers website security services by selling annual or monthly subscriptions to customers. In 2013, SiteLock and GoDaddy entered into a contract (“Reseller Agreement”) under which GoDaddy would market and sell SiteLock’s website security services to GoDaddy’s customers. In 2018, SiteLock’s parent company, Innovative Business Services, LLC (“IBS”) entered into a securities purchase agreement (“SPA”) with SiteLock Intermediate Holdings, LLC (“SIH”). SIH was, in turn, affiliated with the ABRY investment fund. Under the agreement, SIH acquired all of the equity in IBS. As a result of the transaction, SiteLock became a wholly owned indirect subsidiary of SIH but remained a wholly owned direct subsidiary of IBS.

Under the Reseller agreement, when a GoDaddy customer purchased a SiteLock subscription and activated the subscription, GoDaddy remitted a portion of the sale proceeds to SiteLock. However, when a GoDaddy customer purchased a SiteLock subscription but failed to activate it, GoDaddy did not remit any of the sale proceeds to SiteLock.

In April 2019, SiteLock filed suit against GoDaddy, alleging several causes of action, including breach of contract, unjust enrichment, violations of the Lanham Act, and unfair competition under state law. Specifically, the complaint alleged that GoDaddy used SiteLock’s trademark to promote its competing web security service and breached the Reseller Agreement by refusing to remit payment for SiteLock subscription orders. A trial date was set for November 2022, which was later vacated after GoDaddy raised the issue that SiteLock lacked standing to sue GoDaddy because it assigned the legal claims asserted in this action to ABRY. Before the court was GoDaddy’s motion to dismiss for lack of subject matter jurisdiction.

Motion to dismiss. The court found that SiteLock demonstrated, by a preponderance of the evidence, that it did not assign to ABRY the claims against GoDaddy asserted in this action. It was undisputed that SiteLock would have standing to pursue its trademark, contract, and tort claims asserted in this action unless it assigned those claims to a third party.

GoDaddy’s objection to SiteLock’s submission of the declaration of SiteLock’s president/co-founder which addressed his deposition testimony regarding the IBS asset sale to SIH was rejected. In his declaration, the executive asserted that his deposition testimony was inaccurate and simply reflected his business perspective that SiteLock’s assets were acquired, the purchaser effectively acquired all of SiteLock’s contracts, and was not meant to suggest there was a formal, contractual assignment of contracts or claims from SiteLock to ABRY. The declaration did not qualify as hearsay, was not overly conclusory, and provided a credible explanation for why the deposition testimony was inaccurate. GoDaddy’s objection to the submission of an ABRY executive declaration that there was no assignment of rights by SiteLock in the acquisition as hearsay was also rejected as the declaration had evidentiary value, the court explained.

SiteLock contended that the plain language of the 2018 SPA refuted the argument that SiteLock assigned its claims or contracts against GoDaddy to ABRY or any other entity. GoDaddy’s argument that if SiteLock was not the same corporate entity as IBS or SIH, then it could not rely on the SPA to prove standing was based on a false premise. According to the court, SiteLock was not relying on the SPA to establish standing. Rather, SiteLock provided two sworn declarations, both of which avowed that the 2018 SPA did not involve any assignment. Those representations were consistent with the SPA, which did not discuss any assignment. Moreover, Sitelock persuasively demonstrated that the potentially contradictory statements in the executive’s deposition testimony should be viewed as the product of a good faith mistake, the court concluded.

The Case is No. 2:19-cv-02746-DWL.

Attorneys: Aaseesh P. Polavarapu (Kellogg, Hansen, Todd, Figel & Frederick PLLC) for Sitelock LLC. Arianna K. McLaughlin (Cozen O'Connor) for GoDaddy.com LLC.

Companies: Sitelock LLC; GoDaddy.com LLC

Cases: Trademark ArizonaNews