Copyright 2001 DRI, Inc.

Over the past several years, the Internet and its subset, the World Wide Web, have become increasingly important parts of both business-to-business (“B2B”) and business-to-consumer (“B2C”) commerce. Companies rely upon the Internet not just to communicate, but also to share information, market and sell services and products, introduce new goods and services, provide recall notifications, offer information for vendors and customers, and build brand recognition. While the recent downturn for many pure “dot-com” companies may reflect a return to some business and market fundamentals, it seems unlikely that it will lead to the abandonment of the use of the Internet, web sites, and web pages, or that e-commerce will suddenly disappear from the national and international business scene.

For many businesses in today’s economy, “branding” is critical. Whether it is through print media, television advertising, product tie-ins, logos, or the Internet, businesses rely upon recognition of their trademarks, service marks, logos, and other identifying information to sell their goods and services, and distinguish themselves from their competition. Unfortunately, the value of such marks and logos has created an industry of “knock-offs,” whereby less-than-scrupulous competitors use product styles and branding that mimic or appear similar to more recognized marks, thereby trading on the goodwill created by the original mark or product.

Registrants of domain names that are the same as or similar to well-known marks and names fall into several categories, only some of which are subject to challenge. Leaving aside the category of “parody” sites (which may be allowed on, inter alia, First Amendment grounds, see Bally Total Fitness Holding Corp. v. Faber, 29 F.Supp.2d 1161, 1164 (C.D. Cal. 1998); Lucent Technologies, Inc. v. Lucentsucks.com, 95 F.Supp.2d 528, 535 (E.D. Va. 2000), some alleged “cybersquatters” are actually engaged in businesses that legitimately use a name or mark similar to that of another entity. When that occurs, one must evaluate whether confusion exists, and, if so, whether and how to reconcile the legitimate competing claims to the name. Because context-based top-level domain names (“TLDs”) are presently available only to a limited degree, the conflict cannot usually be resolved merely by changing the three-letter suffix at the end of the domain name; instead, more radical changes may be required.

Of more concern, however, are those cybersquatters who seek to hold hostage a domain name that includes a valuable mark and those who actually use the mark without any legitimate business reason to do so. In these situations, the law traditionally has had several means to address the problem. Section 43(a) of the Lanham Act, 15 U.S.C. section 1125(a), has allowed courts to not only stop trademark infringement, but also to address false designations of origin and false advertising claims. In addition, claims of unfair trade practices have been brought under other federal and state statutes, including unfair competition, unfair trade practices, and anti-dilution statutes.

With the growth of the Internet and e-commerce (both B2B and B2C), historically adequate protections run afoul of new barriers. First, the creation of a business presence–and business name–is now as simple and quick as contacting one of the 74 accredited Registrars, paying a fee (which can be as little as $35), providing registration information, and typing in a domain name. As a result, someone looking to trade on another’s goodwill can create a web presence using that name within a very short period of time. Second, those looking to establish such presences can use the non-physical aspects of the Internet to create a presence and do business in locations outside the borders of the United States, thus making it difficult to both gain U.S. jurisdiction and then, later, enforce whatever orders may be entered to prevent the false advertising. Third, for those truly intent on capitalizing on the goodwill of others, it is far easier to move one’s “web presence” from host server to host server than to move one’s bricks-and-mortar business from state to state, or country to country. The consequence, of course, is that those looking to evade judgments can do so for far longer in the cyberworld.

Congressional Efforts

To address these issues, the United States Congress took several steps during the 1990s. The Trademark Dilution Act of 1996 added Section 43(c) to the Lanham Act, and provides remedies for dilution of “famous” marks. See 11 U.S.C. Section 1125(c)(1). This has been applied against those registering domain names that are the same or similar to famous marks. See, e.g., Panavision International, Inc. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998).

Unfortunately, this enactment did not suffice, even in the United States. As noted in the Toeppen case, courts were concerned that persons would register multiple domain names containing distinctive or famous marks, but rather than use them or even approach the holders of those marks, would simply “warehouse” them, knowing that if the legitimate mark holder ever wished to register the name, he or she would have to come to the illegitimate registrant and purchase the rights to that mark. See Toeppen, 141 F.3d at 1324 and cases cited therein. In that situation, the “commercial use” element under Section 1125(c)(4)(A) might not be met. In addition, courts were faced with the problem that, in some cases, locating the actual registrant to physically serve process could be difficult.

As a consequence of these concerns, Congress passed the Anti-Cybersquatting Consumer Protection Act (“ACPA”) in 1999, enacted as Section 43(d) of the Lanham Act. This statute gave competitors and courts several new tools to combat cybersquatting, but it was “not designed to combat domain name registrants utterly ignorant of certain existing trademarks, or those registrants with a good faith reason to believe that they have the right to register certain domain names.” Harrods Limited v. Sixty Internet Domain Names, 110 F.Supp.2d 420, 426 (E.D. Va. 2000). Instead, it was written to protect against bad faith use of distinctive or famous marks. 15 U.S.C. Section 1125 (d)(1)(A).

The ACPA includes several provisions of immediate interest. First, it grants courts in rem jurisdiction to take action to cancel or transfer domain names where the registrant cannot otherwise be found within the territorial limits of the United States, provided certain procedural requirements are precisely met. See 15 U.S.C. Section 1125(d)(2)(A)(ii)(I); see also, Harrods Limited, 110 F.Supp.2d at 422-23. (An informative example of a litigant failing to jump through the requisite “hoops” can be found in Lucent Technologies, Inc. v. Lucentsucks.com, 95 F.Supp.2d at 531-34). Second, it allows injunctive relief against the res by permitting the in rem action to be brought in the judicial district where the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located, 15 U.S.C. Section 1125(d)(A), in which case the court may solely order the forfeiture, cancellation, or transfer of the domain name. 15 U.S.C. Section 1125(d)(D)(i). Third, it addressed concerns about “warehousing” cybersquatters, by allowing not only actual damages and profits, but also statutory damages of up to $100,000 per violation. 15 U.S.C. Section 1117(d). And, fourth, it listed nonexclusive subfactors to be examined as part of a cybersquatting analysis. 15 U.S.C. Section 1125(d)(B)(i). Significantly, while the ACPA, and its injunction provisions, apply retroactively, its damages provisions only apply to post-enactment registrations, uses, or trafficking.

Notwithstanding these remedial measures, however, the use of courts to force a domain name transfer or cancellation can be time consuming and expensive, especially where the cybersquatter is motivated. Given the recent vintage of this statute, unless the challenger finds a receptive judge willing to enter a temporary restraining order or mandatory preliminary injunction against the core asset in the case (the domain name), see, e.g., Northern Light Technology, Inc. v. Northern Lights Club, 236 F.3d 57 (1st Cir. 2001); Broadbridge Media, L.L.C. v. Hupercd.com, 106 F.Supp.2d 505 (S.D.N.Y. 2000), a cybersquatter could use litigation delaying tactics to either continue to trade on the famous mark or maliciously harm the legitimate holder of such marks. As a result, those businesses and persons without a litigation war chest may have no choice but to either acquiesce in the wrongful use or pay the cybersquatter’s ransom.

Nonetheless, courts have begun to address issues arising under the ACPA, as well as other applicable Lanham Act provisions. The first appellate case, decided by the Second Circuit, examined the nine bad faith factors listed in the ACPA, 15 U.S.C. Section 1125(d)(1)(A), and noted that facts beyond those listed by Congress may control a determination. Sporty’s Farm, L.L.C. v. Sportsman’s Market, Inc., 202 F.3d 489, 499 (2d Cir. 2000). Further, the Fourth Circuit, in affirming summary judgment requiring the transfer of a domain name, noted that the “ACPA was not enacted to give companies the right to fence off every possible combination of letters that bears any similarity to a protected mark. Rather, it was enacted to prevent expropriation of protected marks in cyberspace and to abate the consumer confusion resulting therefrom.” Virtual Works, Inc. v. Volkswagon of America, Inc., 2001 U.S. App. LEXIS 831, *18 (2001). In Northern Light Technology, supra, the First Circuit affirmed the trial court’s findings of bad faith, noting that while the defendant, who had registered “thousands of ‘catchy’ domain names,” accurately asserted that the existence of multiple registrations was not dispositive of the issue, a “well-established pattern of registering multiple domain names containing famous trademarks…has been made highly relevant to the determination of bad faith…in the ACPA.” 236 F.3d at 680.

International Efforts

At least in part because of recognition of the problems of delay and cost, efforts have been made to resolve these disputes without using the American judicial system. The Internet Corporation for Assigned Names and Numbers (“ICANN”) adopted a Uniform Domain Name Dispute Resolution Policy in October 1999, which can be found at http://www.icann.org/udrp/udrp-policy-24oct99.htm. Under that policy, registrants make several warranties and representations, including the completeness and accuracy of their statements, the lack of any knowing infringement, and that the domain will not be used for an unlawful purpose. ICANN also requires that the registrant submit to an administrative proceeding in the event a third party complains to an approved dispute resolution provider that the registrant a) is using a domain name that is identical or confusingly similar to a mark in which the complainant has rights; b) has no rights or legitimate interest in the name; and c) registered and used domain name in bad faith. The complainant bears the burden of establishing each of these elements.

The primary remedy available is the cancellation, transfer, or change of domain name registrations. ICANN’s policy (Section 3) provides, however, that such changes will occur (absent written or electronic instructions) only upon receipt of an order from a court or arbitral tribunal of competent jurisdiction, or receipt of a decision from an administrative panel proceeding in which the registrant was a party. Absent those events, the status quo is maintained.

To implement its policy, ICANN has published rules governing domain name disputes, located at http://www.icann.org/udrp/udrp-rules-24oct99.htm. These rules provide for submission of complaints in hard copy and electronic form (Section 2), responses within 20 days after commencement of the proceeding (Section 5), and decisions without any in-person hearings absent “exceptional” circumstances (Section 13). The decision-making panel may consist of one to three members (Sections 3(b)(iv); 5(b)(iv)), but regardless of the panel makeup, absent exceptional circumstances, the panel is required to forward its decision to a resolution provider within 14 days of its appointment (Section 15(b)).

ICANN presently lists four providers for domain name dispute resolutions. The most recognized provider is the World Intellectual Property Organization (“WIPO”), headquartered in Geneva, Switzerland. This successor to various long-standing intellectual property conventions is a specialized agency of the United Nations, and, as of September 1, 2000, 175 countries, including the United States, were members. The WIPO’s Arbitration and Mediation Center handles domain name dispute resolutions, and its supplemental rules can be found at http://arbiter.wipo.int/domains/rules/supplemental.html. To simplify matters, the WIPO has published on the Internet a model complaint, model response, and methods to electronically submit such “pleadings.” Seehttp://arbiter.wipo.int/domains/filing/index.html.

The WIPO’s goal is to allow domain name disputes to be handled expeditiously. Statistics for calendar year 2000 reflect that for generic TLDs, 1841 cases were filed, of which 1286 were completed. Of those completed matters, sixty-four percent resulted in the transfer or cancellation of the domain name, fourteen percent of the complaints were denied, and the remainder were withdrawn. Almost half of the complainants, and over half of the respondents, were from the United States.

Other providers have been somewhat less active. The CPR Institute for Dispute Resolution (http://www.cpradr.org/ICANN_Menu.htm) lists 19 cases through December 27, 2000, of which three are pending, nine required transfer, five found for the respondent, and one was a “split decision.” Eresolution (http://www.eresolution.ca/services/dnd/arb.htm) received 202 filings through January 2001, of which 103 resulted in domain name transfers, and 17 were still pending. The National Arbitration Forum had 921 submissions through January 30, 2001, of which 619 resulted in cancellation or transfer, and 98 were still pending. Overall, then, of the 2330 cases decided by arbitrators, two-thirds resulted in the challenged mark being transferred or cancelled. Fortunately, from the standpoint of establishing precendent, these decisions are on each provider’s web site, allowing businesses and attorneys to analyze the reasoning behind these rulings.

The analysis within the ICANN rules parallels, in many respects, an infringement analysis under Section 43(a) of the Lanham Act. Those seeking transfer or cancellation must prove each of the following: a) that the domain name registered by the challenged party is identical or confusingly similar to a trademark or service mark in which the complainant has rights; b) that the respondent has no rights or legitimate interest with respect to the domain name; and c) that the domain name has been registered and used in bad faith. Failure to prove any of these elements is fatal. For instance, in the case of the musician Sting, efforts to secure transfer of the domain name http://www.sting.com/ were thwarted by an “Internet on-line gamer” who ostensibly used that moniker for his “Quake” activities, and further because the word “sting” could have multiple connotations. See Gordon Sumner, p/k/a Sting v. Michael Urvan, http://arbiter.wipo.int/domains/decisions/html/2000d2000-0596.html. Additionally, Bruce Springstein recently found himself unable to prohibit a fan club from using the name brucespringsteen.com.

What Happens Next?

Clearly, many are choosing to use these proceedings. What seems apparent, however, is that the number of filings is more than expected. Despite the ICANN rules provision for expedited decisions, as of the end of January 2001, over 22 percent of the filed submissions were still pending. This backlog is probably the result of the ever-increasing complexity of the issues being raised. Unfortunately for rightful mark holders, while the cases remain open, in most situations the alleged cybersquatters will continue to use the domain names. For this reason, choosing the right ICANN resolution provider may involve an analysis of not only the knowledge and skills of the available arbitrators but also respective backlogs.

Problems for legitimate name holders may also increase when faced with a cybersquatter who flouts the rules. Whether as a matter of business, extortion, tactics, or petulance, some cybersquatters have chosen not to abide by the rulings of the providers and acquiesce to the transfer of the domain name registrations. Instead, they have maintained their web addresses long after the providers’ decisions, in some cases with a months-long pattern of sarcastic or semi-abusive commentary. For example, although on July 12, 2000, the WIPO ruled that the web address www.jethrotull.com should be transferred from one Denny Hammerton to the Ian Anderson Group (which is associated with the musical band “Jethro Tull”), as of January 31, 2001, the site was still operated by Mr. Hammerton. Moreover, over the past six months, the site has been used for everything from a cybersquatting news and commentary site to an adult web site portal.

This pattern is not unique. Renowned cybersquatter John Zuccarini reportedly refused multiple attempts at service of process of a lawsuit and preliminary injunction motion arising from ACPA claims by Electronics Boutique. Yet, when the web server for his domain was forced to disable the wrongfully registered domains, Zuccarini curiously e-mailed the server to reactivate the domains. Electronic Boutique Holdings Corp. v. Zuccarini, 2000 U.S. Dist. LEXIS 15719, *4-6 (E.D. Pa. 2000), motion to set aside overruled, 2001 U.S. Dist. LEXIS 765 (E.D. Pa. 2001).

In addition, the standard of review and deference to be given administrative proceedings is a matter presently undecided by the courts. As noted in Weber-Stephen Products Co. v. Armitage Hardware & Building Supply, Inc., ICANN’s policies and rules do not dictate the weight to be given to the panel’s decision. 2000 U.S. Dist. LEXIS 6335, *7 (N.D. Ill. 2000). Consequently, for those domain name disputes in which the name holder challenges the panel’s decision, courts will be required to sift through critical questions that, potentially, could either buttress or limit the value of the ICANN procedures.

At present, however, it appears that some cybersquatters are choosing to disregard WIPO’s decisions, requiring the victorious mark holders to file legal actions to enforce the decisions. ICANN’s domain name resolution policy provides that while the provider’s decision will be effective ten business days after a registrar is informed of the decision, transfers or cancellations will be automatically suspended if the Registrar receives official “documentation” that the challenged name holder has filed suit against the complainant. Uniform Domain Name Resolution Policy, dated October 24, 1999, Section 4(k). As a result, a cybersquatter can, without a great deal of effort, delay the implementation of an ICANN transfer ruling.

The Future

As this article goes to press, the WIPO will be holding a conference to address domain name issues. The agenda includes future trends for country domains, treatment of intellectual property in ccTLDs (“country code top-level domains”), and how rights holders are coping with infringements. In addition, coalitions exist of both traditional trademark holders and so-called “Domain Name Rights” groups, each of which brings its own perspective to this dispute. Until the courts have an opportunity to weigh in regarding the impact if the ICANN procedures, it can be expected that those cybersquatters wishing to benefit from uncharted territory will be able to do so. In the interim, however, it can be hoped that in most cases the vision of an efficient, cost-effective resolution of domain name disputes through the ICANN procedures will be fulfilled.

Finally, the recent approval of seven new context-specific TLDs, and the possible future allowance of additional TLDs, may help ease conflicts between parties who each claim a legitimate interest in a particular domain name. Seehttp://www.icann.org/announcements/icann-pr16nov00.htm. While this is unlikely to stop the spread of cybersquatting, it may afford similarly branded businesses an easy way to co-exist on the World Wide Web.