Senate Closes in on Domain Name Cybersquatting
by Shelley M. Liberto, Esq.
In early August 1999, the United States Senate passed the "Anti-Cybersquatting Consumer Protection Act," targeting sharp entrepreneurs who register and sell Internet domain names that are identical or similar to a business' service mark or trademark. (See WWWiz March 1998: "Domain Name Conflicts: 'Hey! That's My Dot Com!'") The Bill, SB1255, passed unanimously. The legislative purpose of the Bill is to stop an unfair business tactic that forces businesses to pay a kind of ransom to recover their name recognition from individuals who, in bad faith, register a domain name that should not be theirs. To date, the battle against bad faith registration of business names has been played out in the courts without the protection of statutory law.
Cybersquatting Under Current Law
The practice of cybersquatting is used to pressure companies to buy domain names that reflect their own business names, or to redirect Web surfers to the cybersquatter's Web site. For example, without the benefits of legislation such as SB1255, Gateway recently paid $100,000 to a cybersquatter who had placed pornographic images on the Web site "www.gateway2000.com." As well, Porsche Cars North America, Inc., was recently unsuccessful in the United States District Court for the Eastern District of Virginia in claiming a series of domain names that incorporated the Porsche trademark.
Prior to the enactment of any legislation, cybersquatting was checked by court-made law tailored for each specific factual circumstance. One of the most important cases in this area is Panavision International v. Dennis Toeppen, United States District Court, Central District of California. Defendant Dennis Toeppen undertook the enterprise of registering domain names that were registered trademarks without using the domain names for business. His sole purpose was to exact payment from the various businesses in exchange for relinquishment of the domain name. Toeppen registered, among others, aircanada.com, anaheimstadium.com, australiaopen.com, deltaairlines.com, lufthansa.com, northwestairlines.com, yankeestadium.com, and Panavision.com.
Panavision, a company that makes motion picture and television equipment, challenged Toeppen's demand for $13,000 in exchange for the domain name that contained its own registered trademark. Existing trademark law did not account for cybersquatting as a violation. Accordingly, the court was required to "stretch" the law to create a new form of violation in a legally awkward fashion. The court was forced to incorporate the concept of "blurring," which involves a "whittling away" of the selling power and value of a trademark by unauthorized use. By registering, but not using, the trademark, Toeppen escaped obvious liability under the Trademark Act, forcing the court to rationalize:
Toeppen was able not merely to lessen the capacity of a famous mark to identify and distinguish goods or services, but to eliminate the capacity of the Panavision mark to identify and distinguish Panavision's goods and services on the Internet.
The court was so frustrated with its untidy application of existing law that it stated:
Many of the issues, both legal and technical, that arise from the intersection of trademark law and the Internet are difficult to resolve. Ultimately, Congressional action seems necessary.
InterNic's Dispute Resolution Procedure
Absent statutory protection, organizations like Network Solutions, responsible for registering domain names, have instituted their own dispute resolution procedures apart from resort to the law. If the owner of a trademark or service mark spots its name as a registered domain name, the challenger submits the trademark or service mark registration to Network Solutions, as well as a copy of a written notice sent to the bogus domain name registrant. If the registration precedes the establishment of the domain name, and the domain name is the same or confusingly similar to the protected name, Network Solutions assists in finding the registrant a new non-offending name. If the registrant fails to cooperate in giving up its cybersquatting activity, the domain name is placed on "hold," thereby depriving all parties of its use until the issue is resolved by arbitration, agreement, or a lawsuit. Under SB1255, litigation rights, as a follow-up to the Network Solutions procedure, are formalized.
Elements of SB1225
The Senate recognizes the cybersquatting problem by including text in the proposed law that states:
Congress finds [that] the registration, trafficking in, or use of a domain name that is identical to, confusingly similar to, or dilutive of a trademark or service mark...without regard to the goods or services of the parties, with the bad faith intent to profit from the goodwill of another's mark...results in consumer fraud and public confusion;...impairs electronic commerce which is important to interstate commerce and the United States economy;...deprives legitimate trademark owners of substantial revenues;...and places unreasonable, intolerable and overwhelming burdens on trademark owners...
Although language making cybersquatting a felony has been deleted, SB1225 still carries with it sharp penalties for cybersquatting. Any person found liable under the Bill would be subject to an injunction, monetary damages, and illicit profits which, by choice of the plaintiff, may be set by statute between $1,000 and $100,000 per domain name as the court considers just. The Bill specifically directs a court to look at certain factors to determine whether bad faith cybersquatting has taken place.
In determining whether there is a bad faith intent on the part of the alleged cybersquatter, courts look at, among other things, the defendant's intent to divert Web traffic from the mark owner's online location, the defendant's offers to sell the domain name without having used it, and whether the defendant is in the business of accumulating multiple domain names, for the purpose of sale, which are similar to trademarks or services. The court may also order the forfeiture, cancellation or transfer of the domain name to the owner of the trademark or service mark.
The Internet continues to be a proving ground for the law of commerce and trade, and Congress' ability to keep up with its rapid development. "Cybersquatting" has long been a destructive and parasitic practice that has stymied the commercial success of legitimate businesses that have been unable to pay the ransom demanded by the cybersquatting industry. The Anti-Cybersquatting Consumer Protection Act promises to terminate what has been an unfair business practice, which has until now been beyond the reach of the law.
Shelley M. Liberto is an attorney practicing Internet and intellectual property law, and general business litigation, in Santa Ana, California.