Cybersquatting and Domain Disputes

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Cybersquatting is the bad faith registration of a well-known trademark as a domain name. Typically, the cybersquatter hopes to later profit by reselling the domain name back to the trademark owner. The failure to sell or offer the names is not the only evidence of bad faith, however. For example, in one case a company registered domain names that combined elements of Bank of America and Merrill Lynch, such as 'bofaml.com'. The defendant argued that it had never sold a domain name. The court rejected that argument since the defendant earned considerable sums by “parking” the domains — that is, by generating pay-per-click revenue. (Webadviso v. Bank of America Corp.)

Cybersquatting originated at a time when most businesses were not savvy about the commercial opportunities on the Internet. Some entrepreneurial souls registered the names of well-known companies as domain names with the intent of selling the names back to the companies when the companies finally realized the economic potential of the Internet. But times have changed and a victim of cybersquatting in the United States can now sue under the provisions of the Anticybersquatting Consumer Protection Act (ACPA) or can fight the cybersquatter using an international arbitration system created by the Internet Corporation of Assigned Names and Numbers (ICANN).

The ACPA defines cybersquatting as registering, trafficking in, or using a domain name with the intent to profit in bad faith from the goodwill of a trademark belonging to someone else. The ICANN arbitration system is considered by trademark experts to be faster and less expensive than suing under the ACPA, and the procedure does not require an attorney. For information on the ICANN policy, visit the organization’s website (www.icann.org).

Anticybersquatting Consumer Protection Act

The Anticybersquatting Consumer Protection Act (ACPA) was enacted in order to protect businesses against the practice of cybersquatting. (15 United States Code, Section 1125(d).) This new law authorizes a trademark owner to sue an alleged cybersquatter in federal court and obtain a court order transferring the domain name back to the mark’s owner. In some cases, the cybersquatter must pay money damages. In order to stop a cybersquatter, the mark’s true owner must prove all of the following:

  • The domain name registrant had a bad-faith intent to profit from the mark.
  • The mark was distinctive at the time the domain name was first registered.
  • The domain name is identical or confusingly similar to the mark.
  • The mark qualifies for protection under federal trademark laws—that is, the mark is distinctive and its owner was the first to use the mark in commerce.

If the person or company who registered the domain name had reasonable grounds to believe that the use of the domain name was fair and lawful, they would avoid a court decision that they acted in bad faith. In other words, if the accused cybersquatter can demonstrate a legitimate reason to register the domain name other than to sell it back to the trademark owner for a profit, or to trade off the trademark owner’s good will in the trademark — for example, using it to generate Google Adsense revenue, then a court will probably determine the domain was not acquired in bad faith.

Typosquatting

A common variation on cybersquatting is typosquatting, in which misspellings of a domain name are used to mistakenly attract or mislead consumers. Typosquatting can be lucrative when tied to the use of an Internet advertising scheme such as Google Adsense. For example, in a 2006 case a typosquatter purchased domain names such as lnadsend.com and landswnd.com, and then, after sending the customer to the legitimate Land’s End website, charged Land’s End, claiming that these were referrals under the Land’s End referral program (for which the typosquatter belonged under another, legitimate domain). Land’s End filed suit, and the defendant’s attempts to dismiss the suit were rejected. (Lands’ End, Inc. v. Remy)

What is not Cybersquatting?

The bad faith aspect of cybersquatting is important, because it separates cybersquatting from other permissible uses of someone else’s trademark in a domain name.  Generally, domain names purchased for purposes other than profiting from someone else’s trademark do not usually lead to cybersquatting. For example, it is not cybersquatting if someone is angry at Company X and purchases and uses the domain name “companyxsucks.com” to create a website criticizing Company X. Such uses are permissible under free speech rules. Similarly, many trademarks have alternate uses and meanings. Again, the line that separates these uses from cybersquatting is whether domain name is purchased for the purpose of trading off, or profiting from the trademark.

Anticybersquatting Consumer Protection Act of 1999

The ACPA expended the Lanham Act (the American law governing trademarks and unfair competition) to prohibit cybersquatting. In order for the ACPA to be applied by an American court for damages besides return of the domain name, however, the court must have jurisdiction over the defendant, the owner of the infringing domain name.  This can be difficult, because if the owner lives in another country, there are often few grounds to argue for jurisdiction in the United States. If the owner were to sue the defendant in his own country, there might not be specific anti-cybersquatting laws in that country.

The ACPA allows a trademark holder to sue the person who registered the domain name or the domain name itself (called an “in rem” action, meaning it is against the property) when the domain was registered with the sole intent of selling the domain back to the trademark owner for a profit. It applies to domain names containing trademarks and/or individuals’ names. A plaintiff can only sue under the in rem provision after she has determined that she cannot get personal jurisdiction over the defendant (for example, if he lives in another country) or she has been unable to locate the defendant after certain specified good faith efforts.  If she is victorious under the in rem provision, she can only recover the domain name itself; she could not get damages, costs, or attorney’s fees.

To bring a claim under the ACPA due to the use of a trademark, the plaintiff must show:

  • the mark is distinctive or famous;
  • the domain name registrant had a bad faith to profit from the mark; and
  • the domain name and the trademark are identical or confusingly similar (for famous marks, the domain name can be identical, confusingly similar, or dilutive).

Courts use the following nonexclusive factors to identify bad faith:

  • the rights of the domain owner in the domain name;
  • whether the domain name is the name of the owner;
  • if the owner used the domain name in connection with the sale of goods or services;
  • the owner’s noncommercial or fair use of the mark on an associated website;
  • whether the owner intended to divert consumers from the mark owner’s own website, either for commercial gain or to tarnish or disparage the mark by creating a likelihood of confusion over whether the website is associated with the mark owner;
  • whether the owner offered to sell the domain name without intending to use it to sell goods or services, and whether the owner has a history of registering domain names just to sell them back to mark holders or third parties;
  • whether the owner used false contact information when applying for the registration of the domain name or updating the registration, or whether the owner has a history of providing false information during registration;
  • whether the owner has multiple domain names which he knows are identical or confusingly similar to marks of others that are distinctive, or dilutive of famous marks of others; and
  • how distinctive or famous the mark is within the meaning of the Lanham Act.

Domain Dispute Arbitration

The international agency that oversees domain names (ICANN) has established a dispute resolution procedure for trademark owners who believe that their domain name has been hijacked. The Uniform Dispute Resolution Procedure (UDRP) is a nonbinding arbitration procedure that is usually resolved within 60 days — much faster than any court decision would take. However, some commentators have argued that the UDRP procedure has become more cumbersome and expensive than originally intended and occasionally unpredictable in its outcome. In addition, since the UDRP results are not binding, either party can take the case to a local court if unhappy with the result. Also, based upon past ICANN arbitrations, the odds seem to be stacked heavily in favor of the person who has or claims to have trademark rights. To review the ICANN dispute resolution rules, go to www.icann.org/udrp/udrp.htm.

ICANN has authority over domain names in general and thus jurisdiction is a lesser concern than under the ACPA where U.S. Courts may not have jurisdiction over foreign nationals. Parties who are unhappy about UDRP decisions can file lawsuits in their nation regarding those decisions. These are not appeals, in the traditional sense, and the national courts can disregard UDRP precedents and rulings. Unhappy trademark owners in the U.S.  can also bring an ACPA action in federal court if they lose at ICANN.  Generally, the UDRP is intended to be more cost-effective than a typical lawsuit.

Similar to cases under the ACPA, the plaintiff in a UDRP action must show three things to establish a cause of action:

  • the domain name is identical or confusingly similar to a mark owned by the plaintiff;
  • the owner of the domain name does not have any rights in the domain name; and
  • the owner registered the domain name in bad faith.

The nonexclusive factors considered by ICANN in identifying bad faith are:

  • whether the owner registered or acquired the domain name primarily for the purpose of selling the domain name to the owner of the mark (or to a competitor of the mark owner), at a price higher than the out-of-pocket cost of the domain name;
  • whether the owner registered the domain name to prevent the owner of the mark from using the mark in its own domain name, if a pattern of such conduct by the domain name owner;
  • whether the owner of the domain name registered the domain primarily for the purpose of disrupting the business of a competitor; or
  • whether the owner has intentionally used the domain name to create a likelihood of confusion between his own website and the trademark at issue to attract internet consumers to his website for commercial gain.

Should Your Represent Yourself in a Cybersquatting Dispute?

If you believe that someone else is cybersquatting, or someone has accused you of cybersquatting, you may be able to handle it yourself by writing letters or by participating in an ICANN arbitration. However, if the domain name is crucial for your business, you should always consult with an intellectual property attorney, as domain name disputes can turn into complex and unpredictable battles. Speak to an attorney to determine your rights.

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