Legal Matters: Keep It in Your Domain
In the first century B.C., the Roman author Publilius Syrus wrote: “A good reputation is more valuable than money.” More than two millennia later, it remains true that a merchant’s brand, which carries its reputation, is its most valuable asset. Consequently, the piratical misuse of brand names on the Internet is a persistent problem that plagues many online retailers.
“Cybersquatting” refers to the unauthorized registration of a domain name that incorporates a trademark belonging to someone else. This modern form of reputation theft is surprisingly easy to commit. Domain names can be obtained from various companies that are authorized to ensure a domain name, for which they receive an application, is unique and not currently in use. But these companies don’t determine whether the domain name being registered rightfully belongs to someone else.
Naturally, the reason cybersquatters register other companies’ brand names is to make money. In many instances, they hope to profit when the rightful owner of the brand seeks to use its trademark as a URL on the Web, only to find that someone else already has registered it. The true owner may find it cheaper to purchase the domain name, rather than pursue legal remedies.
And Then There’s Click Fraud
Other times, the domain name might be used to “game” the trademark owner’s online affiliate program through “click fraud.” Click fraud occurs when an Internet user mistakenly navigates to a site owned by a cybersquatter while trying to reach the Web site of a bona fide retailer.
For example, an Internet shopper might mistakenly type “jcpeney.com” in the location bar of a Web browser instead of “jcpenney.com.” Upon arriving at the site located at “jcpeney.com,” the user automatically may be redirected to the correct Web site. In the process, however, the cybersquatter collects a referral fee from the bona fide merchant based upon the clickthrough.
The cybersquatting phenomenon has existed since the early days of the Internet, and there are numerous examples of trademark owners paying large sums to recover domain names. The Internet Corporation for Assigned Names and Numbers (ICANN) is the organization responsible for doling out domain names. In the beginning, it did so strictly on a first come, first served basis. Consequently, it was relatively easy for cybersquatters to grab famous brand names and hold out for large payments when trademark owners sought to acquire their own brand names for use as Internet addresses.
Hertz, Avon and Panasonic were all early victims of this practice and joined many Fortune 500 companies that frequently paid tens of thousands of dollars to purchase domain names corresponding to their brands.
Early cybersquatters operated in an environment where the legality of their practice, however egregious, was unclear. There were few reliable and cost-effective tools available to trademark owners to combat the practice. Until the late ’90s, for example, it wasn’t clear that existing U.S. trademark law prohibited cybersquatting.
However, in 1999, two developments changed the legal landscape:
- Congress enacted the Anticybersquatting Consumer Protection Act of 1999 (also known as the Truth in Domain Names Act). This enables trademark owners to sue in federal court to recover domain names, including the right to bring action against the domain name itself, even if the registrant is beyond the jurisdictional reach of the federal courts.
- ICANN rolled out a contractual method for resolving ownership disputes, called the Uniform Domain Name Dispute Resolution Policy (UDRP). As a condition of obtaining a domain name, every registrant must agree to submit to an arbitration process to determine whether it’s entitled to maintain a domain name similar to another company’s trademark. This process applies to all generic, top-level domains, which include the ubiquitous “.com” as well as “.net,” “.org,” “.biz” and others.
It’s important to note, however, that some so-called country code top-level domains — like .ca (Canada) and .cn (China) — don’t participate in the UDRP process. These domains are governed by rules established by national registrars in the various countries, and those jurisdictions have different rules and standards for recovering domain names.
Plead Your Case
Of the two procedures — federal court litigation and the UDRP procedure — the UDRP is far more frequently used because of the modest cost and relative ease of administration. A trademark owner may initiate a UDRP by filing a petition with one of several private dispute resolution service providers. The petition filed by the trademark owner must establish three elements:
- First, the trademark owner must demonstrate that the domain name is identical to, or confusingly similar to, a trademark in which the complaining party has rights. Common misspellings or typographical errors are typically sufficient to satisfy this requirement.
- Second, the trademark owner must prove the cybersquatter has no legitimate rights to the trademark. Lack of use of the domain name, offering the domain for sale or the use of the domain in connection with a competitive service is usually sufficient to satisfy
this requirement. - Third, the trademark owner must show that the domain name was registered and is being used in bad faith. Typical examples of bad faith registration include use of the domain name for fraudulent purposes, such as click fraud or to direct traffic to a competing Web site.
UDRP proceedings typically take place through electronic submission of documents (i.e., no in-person hearing) and may involve a single arbitrator or a panel of three arbitrators.
Fees differ among the various service providers, ranging from $1,500 to $7,500 depending upon the number of domain names at issue and the number of arbitrators. A successful UDRP proceeding results in the transfer of the domain name to the trademark owner.
The Payback
The great strength of the UDRP process is that it provides a relatively fast and reliable way to recover a domain name. A high percentage of UDRP cases result in decisions in favor of trademark owners. Indeed, in our practice we’ve found cybersquatters often fail even to file a response. Today, a merchant’s vigilance and aggressive defense of trademarks effectively can counter this menacing form of Internet piracy.
George S. Isaacson is a senior partner with Brann & Isaacson. He represents multichannel merchants on tax matters and is tax counsel to the Direct Marketing Association. You can reach him at gisaacson@brannlaw.com.
