Trademark Abuse by Domain Name Cybersquatters & Cyberpirates

By Ryan M. Kaatz

Introduction

Often referred to as a “network of networks,” the Internet is a worldwide, interconnected packet switched network, which uses Internet Protocol (“IP”) to provide for e-mail, online chat and the World Wide Web, among other applications. Each host computer has a unique IP address and one computer can host a variety of applications. The Internet’s design results in a network both with no central control and no single point of failure. The Internet is often confused with the World Wide Web, although the Internet interconnects computer networks, while the WWW consists of interconnected documents connected by hyperlinks on the Internet.

Similar to a telephone number, a computer’s exclusive IP address differentiates one host computer from other computers on the Internet. Since IP addresses are long strings of numbers, and therefore difficult for people to remember, the Domain Name System (“DNS”) assigns standard alphanumeric characters to the particular numbers in the IP address so that the Internet user can see memorable letters and words instead of the long string of numbers.

Generic top-level domains (“gTLDs”) such as .com, .net and .org comprise the majority of registered domain names. gTLDs may consist of three elements: the top-level domain, the second-level domain and the third-level domain. For example, in the <exchange.ladas.com> domain name “.com” is the top-level domain, “ladas” is the second-level domain and “exchange” is the third-level domain. The top-level domain is often viewed as a suffix, and the same suffix or ending can be shared by a number of domain addresses. The second-level domain is selected by the Internet user and assigned as an address in conjunction with the top-level domain by the domain name registrar for that top-level domain. The third-level domain is a subdomain used and selected by the host computer, albeit according to certain conventions. The third-level domain of a gTLD is not part of the domain name registry or dispute management systems.

On the other hand, some country-code top-level domains (“ccTLDs”) only permit registration in the third level. For example, it is not possible to register a .uk domain name in the second level. The .uk registry only permits domain name registration in the third level, i.e. .co.uk, .org.uk, etc. Moreover, certain top-level domains have created additional restrictions on the registration of domain names. For example, to register a domain name in Germany (.de), the registrant is required to provide an administrative contact with a German address. Many ccTLDs have local presence requirements and registration policies often change.

Domain names derive their value from the combination of the worldwide reach of the Internet and the singular quality of each domain name. Since the Internet is global, Internet users can access a website from anywhere in the world. Thus, by operating a website on the Internet, a company can basically reach anyone who has access to the Internet. Furthermore, only one party may hold a domain name registration, making each domain name unique.

The only thing a potential domain name registrant needs to register an unrestricted[1] gTLD is a credit card or other acceptable form of payment. A licensed domain name registrar requires a registrant to complete an application that lists contact information such as phone numbers and addresses. Registrars, however, have no obligation to determine whether a registrant has a legal right to obtain a domain name that could potentially infringe the rights of a trademark holder. For each top-level domain, the combination of each top-level domain and second-level domain name are registered on a “first come, first served” basis. Each domain name potentially is one-of-a-kind and available to any person or entity interested in registering the domain name. Due to the global character of the Internet and the unique quality of each domain name, domain names have come to be considered valuable commodities.

Economic Value of Domain Names to Cybersquatters

Trademark holders were not the only parties that realized the inherent value of domain names. Since registrants acquire domain name registrations on a “first come, first served” basis, in some cases, parties registered domain names incorporating the prominent trademarks of others before the trademark holder registered the domain name. The registrant then offered the domain name registration to the trademark owner for sale at a substantial markup from the cost of the registration—a practice called “cybersquatting”.

Over the years, cybersquatters, or the somewhat broader term for abusers – “cyberpirates”, have developed innovative ways to profit on the Internet from the inherent value of the trademark owners’ marks. Rather than attempting to sell the registration to a trademark owner, domain name registrants have also resorted to registering domain names that incorporate trademarked terms with the intent to benefit commercially from Internet traffic that mistakenly arrives at the registrant’s website. A further variation of online infringement is “typosquatting,” wherein domain names are registered incorporating misspelled versions of trademarked terms. Another form occurs when competitors register domain names featuring trademarks of their rivals in order to block them from valuable use of their own marks as featured addresses on the World Wide Web. Each of these activities, however, is still generally referred to as cybersquatting or cyberpiracy.

Although domain name registrants seeking to benefit from domain names confusingly similar to trademarks initially attempted to sell the domain names directly to the trademark owner at excessive prices, registrants soon learned that domain names could be monetized in other ways. Specific trends in domain name cybersquatting have largely paralleled a number of major trends in moneymaking activities on the World Wide Web. For example, registrants often connected the domain name incorporating a trademark to websites featuring pornographic content, since pornographic sites were an early moneymaker on the Internet. The registrant of the domain name would then receive a click-through fee whenever an Internet user inadvertently arrived at the pornographic website and clicked on one of the links.

Entire industries have developed around the popularity of Internet search engines and portals for surfing the Internet, Internet advertising and third party payment arrangements per click of those navigating through certain links and sites on the Internet. One particular outgrowth in the monetization of domain names on the Internet is a particular practice that some call “Search Engine Optimization” (“SEO”). SEO practitioners register a large number of domain names, aggregating the users who arrive at their websites associated with the domain names. The websites are often automatically generated by semantic techniques that extrapolate links from the terms in the domain name that the Internet user is likely to click. The website content presented to the user is often little more than a collection of sponsored links and a search engine. Where the SEO site aggregates sites with domain names featuring trademarks, the user can be misdirected to one of these SEO sites where it is often presented with sponsored links for products and services of competitors to the trademark holder.

UDRP and ACPA: Dispute Resolution of gTLDs

The Uniform Domain Name Dispute Resolution Policy (“UDRP”) was developed in large part to address abuses of the domain name registration process that affect owners of trademarks. To become a licensed registrar of domains, companies are required to include the UDRP in their registration agreements for gTLDs, such as .com, .net and .org -- three of the top-five most popular gTLDs by total number of registrations. Whenever such a domain name is registered, the registrant agrees to resolve any disputes between it and third parties under the UDRP arbitration process.

There are three elements that an arbitration complainant must prove in order to have the domain name registration transferred or cancelled under the UDRP:

1. the domain name is identical or confusingly similar to a mark in which the complainant has rights;

2. the registrant has no rights to or legitimate interests in the disputed domain name; and

3. the domain name has been registered and used in bad faith[2].

The UDRP sets forth a non-exclusive list of different types of circumstances that can be used as evidence that the registrant’s domain name was registered and used in bad faith[3]. The UDRP also provides a list of circumstances that show the registrant has rights to and legitimate interests in the domain name[4]. The latter list essentially provides the domain name registrant with what amount to affirmative defenses in support of its domain name registration. The benefits of filing under the UDRP include the speed and relative economy of arbitrated resolution of such disputes; however, the only remedies available are the cancellation or transfer of the disputed domain name.

Around the same time that the UDRP was developed, the United States Congress passed the Anticybersquatting Consumer Protection Act (“ACPA”)[5]. Under the ACPA, the registration, traffic or use of a domain name that is identical or confusingly similar to a mark or dilutive of a famous mark with a bad-faith intent to profit constitutes infringement[6]. The ACPA’s standards are determined “without regard to the goods or services of the parties”, as distinguished from the criteria in trademark infringement proceedings. The ACPA lists nine non-exclusive circumstances that can be used as evidence of a bad-faith intent to profit; these largely parallel analogous provisions in the UDRP[7]. The ACPA explicitly extends to personal names as well as trademarks[8].

Domain Name Disputes in ccTLDs

In addition to remedies of domain name cancellation and transfer, the ACPA also provides for monetary damages including statutory damages of up to $100,000 per domain name[9]. While initiating a claim under the ACPA incurs the expense and time of federal litigation, the availability of monetary damages in some cases may make it a more effective option. The availability of discovery and/or judgment by default may, in appropriate cases, also argue for an ACPA action. Also, in cases where personal jurisdiction cannot be obtained or the domain name registrant cannot be found, the ACPA provides for an “in rem” right of action in certain cases against the domain name registration(s).

In addition to gTLDs, there are various country-code top-level domains (“ccTLDs”) for many countries worldwide. As they have risen in popularity, various ccTLDs have encountered abusive domain name registration as well. The .uk and .de extensions have grown to become among the most popular ccTLDs, as of this writing ranking in the top five (along with .com, .net and .org) of the most popular TLD extensions overall.

Nominet, a British company, operates the .uk extension. Although somewhat similar to the UDRP, Nominet developed its own dispute resolution system. If a trademark holder asserts that a domain name registered in the .uk extension violates the trademark holder’s rights in its trademark, the trademark holder may file a claim under the Nominet dispute resolution system. The parties are required by the rules to first attempt to mediate the dispute over the domain name. If mediation fails to bring resolution to the dispute, the dispute extends to arbitration, where the complaining party must prove that it has rights in a name or mark that is identical or similar to the domain name(s) and that the domain name(s), in the hands of the Respondent, is an Abusive Registration[10]. Nominet’s policy defines an Abusive Registration as a domain name that either:

i. was registered or otherwise acquired in a manner which, at the time when the registration or acquisition took place, took unfair advantage of or was unfairly detrimental to the Complainant's Rights; OR

ii. has been used in a manner which took unfair advantage of or was unfairly detrimental to the Complainant's Rights[11].

The .de extension has no dispute resolution policy. Disputes over such domain names must be brought in a German court. DeNIC, the registry of .de domain names, does offer a dispute entry, which prevents the registrant from transferring the domain name during the course of the dispute[12]. A dispute entry maintains the status quo while the parties litigate the registration of the .de domain. Dispute entries are free of charge and expire after one year[13].

Conclusion

The trends of continuing expansion in the community of Internet users, in e-commerce and in Internet website providers, both in the United States and abroad, all point to the growth in importance of protection of trademarks on the Internet from cyberpiracy and cybersquatting, from those domain names registered with generic TLDs as well as with country-code TLDs. To deal with cyberpiracy, trademark owners need to develop policies and strategies to ensure that their trademarks are affirmatively protected by their own domain name registrations under the desired TLDs, as well as by adequate policing and enforcement action against cybersquatters and cyberpirates and their domain name abuse.

Ladas & Parry’s dedicated Digital Brands Practice groups and our domain name watch are uniquely practiced tools for dealing with online infringement. Our Digital Brands Practice is just one of the methods that Ladas & Parry uses to combine its generations of client service in international intellectual property law with a dedicated focus on cutting-edge concerns. For our help in protection of your digital brands on the World Wide Web, please contact our Digital Brands Practice groups in one of our offices.

[1] Certain gTLDs, such as .gov for U.S. government use, .mil for U.S. military use and .edu for educational institutions, are restricted in availability. Because of their restrictions, these top-level domains are not subject to cyberpiracy comparable to unrestricted gTLDs. Sponsored top-level domains (“sTLDs”), such as .travel for the travel industry, .aero for the aviation industry and .mobi for the mobile device industry, are restricted to their respective industries. Experience with sTLDs is still relatively limited, including the extent to which they are subject to cyberpiracy.
[2] ICANN, Uniform Domain Name Dispute Resolution Policy (approved October 24, 1999) at ¶ 4(a).
[3] Id. at ¶ 4(b).
“[T]he following circumstances, in particular but without limitation, if found by the Panel to be present, shall be evidence of the registration and use of a domain name in bad faith:

“(i) circumstances indicating that you have registered or you have acquired the domain name primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the complainant who is the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of your documented out-of-pocket costs directly related to the domain name; or
“(ii) you have registered the domain name in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name, provided that you have engaged in a pattern of such conduct; or
“(iii) you have registered the domain name primarily for the purpose of disrupting the business of a competitor; or
“(iv) by using the domain name, you have intentionally attempted to attract, for commercial gain, Internet users to your web site or other on-line location, by creating a likelihood of confusion with the complainant's mark as to the source, sponsorship, affiliation, or endorsement of your web site or location or of a product or service on your web site or location.” Id.

“(i) before any notice to you of the dispute, your use of, or demonstrable preparations to use, the domain name or a name corresponding to the domain name in connection with a bona fide offering of goods or services; or
“(ii) you (as an individual, business, or other organization) have been commonly known by the domain name, even if you have acquired no trademark or service mark rights; or
“(iii) you are making a legitimate noncommercial or fair use of the domain name, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service mark at issue.” Id.

“(I) the trademark or other intellectual property rights of the person, if any, in the domain name;
“(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
“(III) the person's prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
“(IV) the person's bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
“(V) the person's intent to divert consumers from the mark owner's online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;
“(VI) the person's offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person's prior conduct indicating a pattern of such conduct;
“(VII) the person's provision of material and misleading false contact information when applying for the registration of the domain name, the person's intentional failure to maintain accurate contact information, or the person's prior conduct indicating a pattern of such conduct;
“(VIII) the person's registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
“(IX) the extent to which the mark incorporated in the person's domain name registration is or is not distinctive and famous within the meaning of subsection(c)(1) of section 43.” Id.