YNOT – On the same day it revealed the details of its latest planned initial public offering, Penthouse parent company FriendFinder Networks Inc. was served with a lawsuit in which Facebook seeks redress for infringement and embarrassment caused by one of FriendFinder’s online social networks.
The new IPO plan, registered with the U.S. Securities and Exchange Commission April 27, seeks to sell 5 million shares of common stock at $10 to $12 each — less than one-quarter the number of shares listed at the same price under the company’s previous IPO plan, which was abandoned in 2010 due to what FFN called “poor market conditions.” Bloomberg expects the shares may issue as soon as May 11. The company has applied for listing on the Nasdaq Global Market under the ticker FFN.
At the end of 2010, after reporting completion of a $551 million round of private financing, FFN’s financial statements indicated annual revenue of $346 million with a net loss of $43.2 million. The company’s long-term debt stood at $510 million, up 18 percent over the previous year. According to the IPO statement, the company anticipates net proceeds of $49.4 million from the IPO, the majority of which will be used to pay down the long-term debt.
The lawsuit, filed April 13 in U.S. District Court in San Francisco, accuses FFN and others of deliberate trademark infringement and cybersquatting in the operation of FacebookOfSex.com and similar sites. Facebook claims the sites, because they are adult, also besmirch its good name.
FacebookOfSex.com went dark on Thursday. The URL now resolves to a page indicating the site has been deactivated, but members may continue to log in.
According to documents filed with the court, “Defendants’ mark, websites and affiliate program are a deliberate and blatant attempt to imitate and trade upon the success of the Facebook brand. Association with Defendants’ pornographic websites tarnishes Facebook’s reputation and abuses the trust of Facebook users.”
The lawsuit seeks actual financial damages plus punitive damages of $100,000 per domain and the forfeiture of all named URLs.
The suit also indicates FFN may be mulling a counterclaim.
According to court documents, “[FriendFinder and its subsidiaries] have tried to use the purported ‘FriendFinder’ mark as leverage in negotiations, asserting that Facebook must address [FriendFinder’s] concerns before they will address Facebook’s trademark claims.”
Facebook and its attorneys find little value in that approach.
“Facebook’s use of ‘friend finder’ amounts to descriptive fair use and does not infringe [FriendFinder’s] purported trademark rights in the ‘FriendFinder’ term,” the lawsuit notes.
Of bigger concern for the plaintiff seems to be FFN’s use of the term “Facebook” in clear association with adult entertainment, which Facebook feels will harm its family-friendly reputation and confuse the public.
“…[U]nlike Facebook, defendants permit and indeed encourage the display and posting of pornographic content,” court documents note. “Upon accessing the FacebookOfSex.com site, a visitor immediately encounters highly graphic and sexually explicit images and videos.”
The lawsuit asks the court to declare Facebook’s use of the term “friend finder” fair and valid.
