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LOCKHEED MARTIN
CORPORATION,
Plaintiff-Counter-Defendant-                          No. 97-56734
Appellant,
D.C. No.
v.                                                    CV-96-07438-DDP (ANx)

NETWORK SOLUTIONS, INC.,                              OPINION
Defendant-Counter-
Claimant-Appellee.

Appeal from the United States District Court
for the Central District of California
Dean D. Pregerson, District Judge, Presiding

Argued and Submitted
June 8, 1999--Pasadena, California

Filed October 25, 1999

Before: Dorothy W. Nelson, Stephen Reinhardt, and
Stephen S. Trott, Circuit Judges.

Opinion by Judge Trott

_________________________________________________________________

COUNSEL

David W. Quinto, Quinn Emanuel Urquhart Oliver & Hedges,
Los Angeles, California, for the plaintiff-counter-defendant-
appellant.

Ronald L. Johnston, Blanc Williams Johnston & Kronstadt,
Los Angeles, California, for the defendant-counter-claimant-
appellee.

_________________________________________________________________
OPINION

TROTT, Circuit Judge:

Plaintiff Lockheed Martin Corp. ("Lockheed") appeals
summary judgment in favor of Defendant Network Solutions,
Inc. ("NSI") on Lockheed's action for trademark infringe-
ment, unfair competition, dilution, and contributory infringe-
ment under the Lanham Trademark Act of 1946, 15 U.S.C.
SS 1051-1127 (1994 & Supp. I 1995), as amended (the
"Lanham Act"). The district court published its decision
granting summary judgment to NSI and refusing to grant
Lockheed's motion for leave to amend its complaint. 985 F.
Supp. 949 (C.D. Cal. 1997). Lockheed contends that (1) genu-
ine issues of material fact remain on its contributory infringe-
ment claim, (2) the district court erred in holding that 15
U.S.C. S 1114(2) did not create an independent basis for lia-
bility, and (3) the district court should have permitted Lock-
heed to amend the complaint to add a cause of action for
contributory dilution. We have jurisdiction under 28 U.S.C.
S 1291 (1994), and we affirm the judgment of the district
court.

I

This appeal concerns the NSI registration scheme for
domain-name combinations, which we discussed in our recent
Avery Dennison Corp. v. Sumpton, No. 98-55810 (9th Cir.
August 23, 1999), decision. An interested reader may wish to
review the district court's in-depth discussion of the Internet
technology that forms the basis of this cause of action. 985 F.
Supp. at 951-53.

When a third party seeks to maintain an Internet web site,
that party must reserve a location, called an Internet Protocol
("IP") Address, and do the necessary programming. When an
Internet user accesses the third party's web site, the user
enters the domain-name combination that corresponds to the
IP Address and is routed to the host computer. An industry of
surrogate hosts has developed, where an Internet Service Pro-
vider licenses space on its computers to a third-party web-site
operator, permitting the operator to maintain a web site with-
out keeping his or her computer continually connected to the
Internet. The Internet Service Providers do not provide the
translation service from an entered domain-name combination
to the appropriate IP Address. A separate organization has the
responsibility to perform the translation function.

A

At all relevant times, NSI was the sole National Science
Foundation contractor in charge of registering domain-name
combinations for the top-level domains <.gov>, <.edu>,
<.com>, <.org>, and <.net>. (For clarity, we set off Internet-
related character strings with the caret symbols ("< >").) After
registration, NSI entered the combination and the correspond-
ing IP Address in its database, permitting automatic transla-
tion when an Internet user entered a domain-name
combination. NSI is no longer the exclusive registrar. Since
oral argument on this appeal, a new competitive scheme has
been implemented. See Jeri Clausing, 3-Week Delay in Open-
ing Up Internet Name Registration, N.Y. Times, June 28,
1999, at C1.

When registering with NSI to receive a domain-name com-
bination, an applicant submits NSI's "template" electronically
over the Internet. On approval, NSI puts the domain-name
combination in its database in conjunction with the correct IP
Address. NSI then routes Internet users who enter a certain
domain-name combination to the registrant's computer. At the
time of argument on this appeal, NSI was receiving approxi-
mately 130,000 registrations per month, although evidence
indicates that the number of monthly registrations has been
increasing steadily and is possibly much larger today. Ninety
percent of templates are processed electronically, and the
entire registration process for each application requires
between a few minutes and a few hours. Ten percent of the
time, an employee of NSI reviews the application. Human
intervention might occur because of an error in filling out the
form or because the applied-for domain name includes a
"prohibited" character string -- such as specific variations on
the words Olympic, Red Cross, or NASA, and certain
"obscene" words. NSI also performs a conflict check on all
applications, which compares an application to other regis-
tered domain-name combinations. However, NSI does not
consult third parties during the registration process, check for
a registrant's right to use a particular word in a domain-name
combination, or monitor the use of a combination once regis-
tered. NSI is also not an Internet Service Provider. It performs
none of the "hosting" functions for a web site.

NSI does maintain a post-registration dispute-resolution
procedure. Anyone who feels that his or her rights are vio-
lated by the domain-name combination maintained by a regis-
trant can submit a certified copy of a trademark registration
to NSI. NSI then requires the registrant to obtain a declaratory
judgment of the right to maintain the domain-name combina-
tion. If the registrant fails to do so, its registration is termi-
nated.

B

Lockheed owns and operates "The Skunk Works," an air-
craft design and construction laboratory. Since 1943, The
Skunk Works has developed prototypes of this country's first
jet fighter, the U-2 and SR-71 spy planes, and the F-117 and
F-22 fighter planes. The Skunk Works is currently involved
in designing a possible replacement for the space shuttle.
"Skunk Works" is a registered and incontestable service
mark.

II

Third parties, not involved in this litigation, have registered
domain-name combinations with NSI which are variations on
the phrase "skunk works." These include:
<skunkworks.com>, <skunkworks.net>, <skunkwrks.com>,
<skunkwerks.com>, <skunkworx.com>,
<theskunkworks.com>, <skunkworks1.com>,
<skunkworks.org>, <skunkwear.com>, <the-
skunkwerks.com>, <skunkwurks.com>, and
<theencryptedskunkworks.com>. Lockheed alleges that
many of these registrations infringe and dilute its "Skunk
Works" service mark.

Lockheed sent two letters, on May 7 and June 18, 1996,
bringing the <skunkworks.com> and <skunkworks.net> regis-
trations to NSI's attention. Lockheed's letters informed NSI
of its belief that the third-party registrants were infringing or
diluting Lockheed's service mark. Lockheed requested that
NSI cancel the allegedly offending registrations. Lockheed
also requested that NSI cease registering domain-name com-
binations that included "Skunk Works" or variations on the
phrase and report to Lockheed all such domain-name combi-
nations contained in its registry. NSI took no action on Lock-
heed's requests, informing Lockheed by letter that Lockheed
had failed to comply with the terms of NSI's dispute resolu-
tion policy. Due to Lockheed's dealings with the third-party
registrants, <skunkworks.com> and <skunkworks.net> ceased
being used, but NSI did not immediately cancel the registra-
tions and later permitted a new registrant to register
<skunkworks.com>.

Lockheed sued NSI on October 22, 1996, claiming contrib-
utory service mark infringement, infringement, unfair compe-
tition, and service mark dilution, all in violation of the
Lanham Act, and also seeking declaratory relief. The com-
plaint alleged that four specific domain-name registrations
infringed or diluted Lockheed's "Skunk Works" service mark.
The parties stipulated to April 1, 1997, as the cut-off date for
motions to amend the pleadings. Lockheed later proposed,
over NSI's objection, that the cutoff date be moved to July 7,
1997. NSI moved for summary judgment. On August 19,
1997, Lockheed moved to amend its complaint to add a cause
of action for contributory dilution and to allege several addi-
tional domain-name combinations registered with NSI. The
district court denied the motion to amend and granted sum-
mary judgment to NSI.

III

We review the district court's grant of summary judgment
de novo. Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998).
Viewing the evidence in the light most favorable to the non-
moving party, summary judgment is appropriate if no genuine
issues of material fact remain and the non-moving party is
entitled to judgment as a matter of law. See id.  We review for
an abuse of discretion the district court's decision denying a
motion to amend a complaint. Griggs v. Pace Am. Group,
Inc., 170 F.3d 877, 879 (9th Cir. 1999).

IV

[1] Contributory infringement occurs when the defendant
either intentionally induces a third party to infringe the plain-
tiff's mark or supplies a product to a third party with actual
or constructive knowledge that the product is being used to
infringe the service mark. Inwood Lab., Inc. v. Ives Lab., Inc.,
456 U.S. 844, 853
 -54 (1982). Lockheed alleges only the latter
basis for contributory infringement liability and therefore
must prove that NSI supplies a product to third parties with
actual or constructive knowledge that its product is being used
to infringe "Skunk Works." Id. at 854.

[2] The district court assumed for purposes of summary
judgment that third parties were infringing Lockheed's
"Skunk Works" service mark, and NSI does not ask us to
affirm on the alternate ground that no genuine issue of mate-
rial fact exists as to infringement. We are thus left to consider
two issues on Lockheed's contributory infringement cause of
action: (1) whether NSI supplied a product to third parties and
(2) whether NSI had actual or constructive knowledge of any
infringement. Because we accept the district court's excellent
analysis on the first question, see 985 F. Supp. at 960-62, we
affirm summary judgment without reaching the second.

A

Under the plain language of the Inwood Lab. formulation,
to be liable for contributory infringement, NSI must supply a
"product" to a third party with which the third party infringes
Lockheed's service mark. 
456 U.S. at 854
. In Inwood Lab.,
the Supreme Court considered an action against a manufac-
turer of generic pharmaceuticals. Id. at 847. Non-party phar-
macists packaged the defendant's less-expensive generic pills,
but labeled them with the plaintiff's brand name. Id. at 850.
The plaintiff stated a cause of action for contributory infringe-
ment by alleging that the defendant "continued to supply [the
product] to pharmacists whom the petitioners knew were mis-
labeling generic drugs." Id. at 855.

Inwood Lab. has been applied in the broader context of
renting booth space at a flea market. See Hard Rock Cafe
Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143,
1148-49 (7th Cir. 1992). In Hard Rock, the Seventh Circuit
explicitly addressed the distinction between a product and a
service, noting that while the pharmaceutical company in
Inwood Lab. clearly supplied a product to the third-party
pharmacists, a "temporary help service . . . might not be liable
if it furnished [to the defendant] the workers he employed to
erect his stand." Hard Rock, 955 F.2d at 1148. The court then
held that space at a flea market was more comparable to phar-
maceuticals than to manpower, in part because of the close
comparison between the legal duty owed by a landlord to con-
trol illegal activities on his or her premises and by a manufac-
turer to control illegal use of his or her product. Id. at 1149.
We adopted the Hard Rock analysis in Fonovisa, Inc. v.
Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996), holding
that a flea market could be liable for contributory infringe-
ment if it "suppl[ied] the necessary marketplace" for the sale
of infringing products. Id. at 265 (citing Hard Rock, 955 F.2d
at 1149).

[3] Hard Rock and Fonovisa teach us that when measuring
and weighing a fact pattern in the contributory infringement
context without the convenient "product" mold dealt with in
Inwood Lab., we consider the extent of control exercised by
the defendant over the third party's means of infringement.
Hard Rock, 955 F.2d at 1148-49 (noting the common-law
responsibilities of a landlord regarding illegal activity on a
rented premises); see Fonovisa, 76 F.3d at 265 (adopting
Hard Rock's analysis). Direct control and monitoring of the
instrumentality used by a third party to infringe the plaintiff's
mark permits the expansion of Inwood Lab.'s "supplies a
product" requirement for contributory infringement.

B

[4] The case at bench involves a fact pattern squarely on
the "service" side of the product/service distinction suggested
by Inwood Lab and its offspring. All evidence in the record
indicates that NSI's role differs little from that of the United
States Postal Service: when an Internet user enters a domain-
name combination, NSI translates the domain-name combina-
tion to the registrant's IP Address and routes the information
or command to the corresponding computer. Although NSI's
routing service is only available to a registrant who has paid
NSI's fee, NSI does not supply the domain-name combination
any more than the Postal Service supplies a street address by
performing the routine service of routing mail. As the district
court correctly observed,

         Where domain names are used to infringe, the
         infringement does not result from NSI's publication
         of the domain name list, but from the registrant's use
         of the name on a web site or other Internet form of
         communication in connection with goods or services
         . . . . NSI's involvement with the use of domain
         names does not extend beyond registration.

985 F. Supp. at 958.

[5] The "direct control and monitoring" rule established by
Hard Rock and Fonovisa likewise fails to reach the instant sit-
uation. The district court correctly recognized that NSI's rote
translation service does not entail the kind of direct control
and monitoring required to justify an extension of the
"supplies a product" requirement. See 985 F. Supp. at 962
("While the landlord of a flea market might reasonably be
expected to monitor the merchandise sold on his premises,
NSI cannot reasonably be expected to monitor the Internet.").
Such a stretch would reach well beyond the contemplation of
Inwood Lab. and its progeny.

In an attempt to fit under Fonovisa's umbrella, Lockheed
characterizes NSI's service as a licensing arrangement with
alleged third-party infringers. Although we accept Lockheed's
argument that NSI licenses its routing service to domain-name
registrants, the routing service is just that -- a service. In
Fonovisa and Hard Rock, by contrast, the defendants licensed
real estate, with the consequent direct control over the activity
that the third-party alleged infringers engaged in on the prem-
ises. Hard Rock, 955 F.2d at 1149; see Fonovisa, 96 F.3d at
265.

V

[6] Lockheed also urges that NSI is liable as a printer or
publisher under 15 U.S.C. S 1114(2) (1994), which reads in
pertinent part:

         [T]he remedies given to the owner of a right
         infringed under this chapter or to a person bringing
         an action under section 1125(a) of this title shall be
         limited as follows:
         (A) Where an infringer or violator is engaged
         solely in the business of printing the mark or violat-
         ing matter for others and establishes that he or she
         was an innocent infringer or innocent violator, the
         [plaintiff] shall be entitled as against such infringer
         or violator only to an injunction against future print-
         ing.

         (B) Where the infringement or violation com-
         plained of is contained in . . . an electronic commu-
         nication . . . , the remedies . . . shall be limited to an
         injunction against the presentation . . . in future
         transmissions of such electronic communications.

Id. Section 1114(2) does not create an independent cause of
action, but limits the remedies available to a plaintiff from an
innocent infringer, requiring infringement of a trademark right
or success on an unfair competition claim for injunctive relief.
Barrios v. American Thermal Instruments, Inc., 712 F. Supp.
611, 620 (S.D. Ohio 1988) ("It is important to note that
S 1114(2)(a) . . . does not relate to the potential liability of a
printer. Instead, this statute limits the relief  which a Court
may grant against a printer to an injunction against future
printing."); see 3 J. Thomas McCarthy, Trademarks & Unfair
Competition, S 25:29 (Supp. 1998) ("The Lanham Act, as
amended effective in 1989, limits the liability of innocent
infringement . . . ."). Because Lockheed does not appeal sum-
mary judgment for NSI on Lockheed's claims of service mark
infringement and unfair competition, Lockheed cannot estab-
lish the necessary predicate for its S 1114(2) argument on
appeal.

VI

[7] Finally, Lockheed argues that the district court abused
its discretion in failing to grant leave to amend its complaint
to (1) add a contributory dilution cause of action and (2)
include allegations of several other offending domain-name
combinations. As a general rule, leave to amend should be
"freely given when justice so requires." Fed. R. Civ. P. 15(a);
Foman v. Davis, 
371 U.S. 178, 182
  (1962). We consider four
factors when reviewing a decision whether to permit an
amendment: (1) bad faith on the part of the plaintiffs; (2)
undue delay; (3) prejudice to the opposing party; and (4) futil-
ity of the proposed amendment. Griggs, 170 F.3d at 877.

[8] Although delay is not a dispositive factor in the amend-
ment analysis, it is relevant, Morongo Band of Mission Indi-
ans v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990), especially
when no reason is given for the delay, Swanson v. United
States Forest Serv., 87 F.3d 339, 345 (9th Cir. 1996). Lock-
heed's motion to amend came several months after the stipu-
lated deadline for amending or supplementing the complaint.
Nothing in the proposed amended complaint relied on facts
that were unavailable before the stipulated deadline. The
amendment was one that Lockheed had been considering
three months before the stipulated deadline. Finally, Lock-
heed did not explain the delay, but supported it based on a
claim of no prejudice to NSI.

[9] A need to reopen discovery and therefore delay the pro-
ceedings supports a district court's finding of prejudice from
a delayed motion to amend the complaint. Solomon v. North
Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir.
1998). Lockheed sought to add complaints regarding new
domain-name registrants which would require NSI to conduct
discovery on each new registrant. Lockheed's new cause of
action would also require NSI to conduct discovery of
whether the domain-name registrants were diluting Lock-
heed's service mark. The district court's factual finding that
allowing the late amendment would prejudice NSI is not
clearly erroneous.

[10] Bad faith on the part of the moving party also supports
denying the motion to amend. Griggs, 170 F.3d at 881. Facing
a summary judgment motion, Lockheed sought to amend its
complaint to add causes of action on which discovery had not
been undertaken. The district court noted that this might
reflect bad-faith on the part of Lockheed.

[11] Although we conclude from the above discussion that
the district court was well within its discretion to deny Lock-
heed leave to amend its complaint, the fourth factor -- futility
of the proposed amendment -- also supports the decision.
Where the legal basis for a cause of action is tenuous, futility
supports the refusal to grant leave to amend. Morongo Band,
893 F.2d at 1079. Although courts have discussed contribu-
tory dilution, no appellate court or statute has yet established
the cause of action. Academy of Motion Picture Arts & Sci-
ences v. Network Solutions, Inc., 989 F. Supp. 1276, 1279
(C.D. Cal. 1997).

The one court to recognize the contributory dilution cause
of action defined the claim as encouraging others to dilute.
Keegan v. Apple Computer Inc., 42 U.S.P.Q.2d 1053, 1062
(N.D. Ill. 1996). The proposed cause of action thus appears to
import the definition of "contributory" from Inwood Lab., 456
U.S. at 854. Indeed, Lockheed's proposed amended complaint
alleged that NSI continued to supply its routing service to reg-
istrants, knowing that these parties were diluting Lockheed's
"Skunk Works" service mark. As we have already concluded,
however, NSI does not supply a product or engage in the kind
of direct control and monitoring required to extend the
Inwood Lab. rule. We agree with the district court that futility
supports its decision to refuse leave to amend the complaint.

VII

NSI requested attorneys' fees pursuant to the Lanham Act,
15 U.S.C. S 1117(a). We deny its request because Lockheed's
appeal was not sufficiently unreasonable or frivolous to con-
stitute an "exceptional case[ ]" as required by the Lanham Act
for attorneys' fees to be warranted.

VIII

NSI is not liable for contributory infringement as a matter
of law. Lockheed does not appeal the district court's decision
on its infringement, unfair competition, and dilution claims
against NSI, and the district court did not abuse its discretion
in refusing leave to amend the complaint. We have also con-
sidered Lockheed's request for judicial notice and motion to
strike and deny both.

AFFIRMED.