A client walks into your office and says, “I just went to register my trademark as a domain name but some other individual has already registered it!” What steps will you take to protect your client’s trademark? First, maybe a cease and desist letter. However, if the adverse party declines to transfer its domain name, what next? Perhaps a cause of action under Section 2(d) of the Lanham Act arguing that a likelihood of confusion exists. Or how about a suit under the Federal Trademark Dilution Act (FTDA), Section 43(c) of the Lanham Act. Possibly utilize the dispute resolution proceeding under the Uniform Dispute Resolution Policy (UDRP). Or maybe a cause of action under the newly enacted Section 43(d) of the Lanham Act, otherwise known as the Anticybersquatting Consumer Protection Act. What would be the best way to proceed? Well, it depends. A cause of action against the well-known “cybersquatter” and the less-known “typosquatter” (both referred to as “squatters”) will generally depend upon the facts of each case.
On November 29, 1999 President Clinton signed into law the Anticybersquatting Consumer Protection Act (ACPA). The Act is designed to protect bona fide trademark owner’s rights from “squatters” who misappropriate trademarks in bad faith. “Cybersquatting” occurs when a third-party registers the trademark of another as its domain name with the intent to profit. “Typosquatting” arises when a third-party misspells a trademark owner’s trademark with the intent to profit or misdirect Internet traffic to its website. In order to effectively combat these practices the ACPA was signed into law.
Prior to the ACPA, trademark owners’ rights were protected by the traditional trademark principle of a likelihood of confusion, the Federal Trademark Dilution Act (FTDA), passed into law in 1995, and the Internet Corporation for Assigned Names and Number’s (ICANN) Uniform Dispute Resolution Policy (UDRP). However, trademark owners quickly discovered that sophisticated “squatters” were able to circumvent the reach of these legal tools
Under the traditional theory of a likelihood of confusion, a plaintiff must show that the defendant’s domain name is either identical to or confusingly similar to the plaintiff’s trademark. In addition, the plaintiff must establish that the defendant’s use is in connection with similar goods or services. The problem with this traditional approach arises when a defendant registers its domain name that is identical to or confusingly similar to the plaintiff’s trademark but uses it in connection with differing goods or services, thus, avoiding a likelihood of confusion and the transfer of the domain name. Under this set of facts, a plaintiff will not prevail under the traditional theory of a likelihood of confusion.
Before the enactment of the ACPA, dilution was the most effective cause of action against “squatters.”1 The Federal Trademark Dilution Act (FTDA) was enacted to protect famous trademarks. Dilution is defined by the act as “the lessoning of the capacity of a famous mark to identify and distinguish goods and services, regardless of the presence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception.”2
To succeed on a claim of dilution, the plaintiff must show that: 1) the defendant made commercial use of the mark 2) its mark is famous, which in the Ninth Circuit has become to mean “a substantial degree of fame” 3 , such as Nike, Coca Cola or Ford 3) the defendant made use of the mark after the plaintiffs mark became famous and 4) the defendant’s use has caused dilution of the plaintiff’s mark.4 For many trademark owners the second prong of the test becomes a dilemma, because many trademarks do not fall within the scope of “fame”; therefore, many suits have turned on this factor alone. Another factor that has proven problematic under the FTDA is the issue of “commercial use.” Some courts have held that the mere registration of a domain name and nothing more does not constitute “commercial use” under the Act.5 This interpretation of “commercial use” has left many trademark owners without recourse under the FTDA. However, in the case of Panavision International, L.P. v. Toeppen, 945 F. Supp. 1296 (C.D. Cal. 1996), the defendant, Toeppen, registered the plaintiff’s trademark “Panavision” as a domain name where Toeppen merely displayed aerial pictures of Pana, Illinois. Toeppen argued that his use of the plaintiff’s mark did not constitute “commercial use” as specified under the Act.6 However, when Toeppen offered to sell the domain name to the plaintiff, the Court found that the offer constituted “commercial use.”7 The Court in Panavision chose not to apply the standard theories of dilution, namely, blurring8 and tarnishment,9 to the case. Instead the Court stated that Toeppen’s registering of the plaintiff’s trademark as a domain name lessened the plaintiff’s capacity to use its famous trademark in connection with its goods and services.10 The Court then extended 15 U.S.C. 1127 (‘dilution’) to the lessening of Panavision’s ability to use its mark in connection with its goods and services on the Internet.11 “Cybersquatting dilution” occurs, as stated by the Panavision Court, when potential consumers are unable to locate the web page of a particular company, thus, out of frustration, locate a competitor’s website.12
The “fame” and “use” requirements have limited the reach for many trademark owners under the FTDA. Most trademark owners will find it difficult to establish that they own a famous trademark. Further, the sophisticated “squatter” may circumvent the “use” requirement by merely registering the domain name and nothing more or post “fair use” commentary on its website which is protected by the First Amendment. Further, the remedies provided under the FTDA do not discourage “squatting.” Under the FTDA, the likely result will be the transfer of the domain name to the trademark owner.13 The mere transfer of a domain name, without more, has proven not to be an adequate deterrent against the misappropriation of trademarks by “cyber-pirates.”
In response to the deficiencies of the FTDA and traditional law, ICANN14 instituted the Uniform Dispute Resolution Policy (UDRP), which has been adopted by five accredited domain name registrars.15 UDRP proceedings are mandatory in the event a third party files a complaint against a domain name owner with an approved Provider.16
Paragraph four of the UDRP sets out the criteria for bringing aclaim under the Policy. It states that the plaintiff must establish: 1) that the defendant’s domain name is identical to or confusingly similar to the plaintiff’s trademark or service mark 2) that the defendant has no rights or legitimate interest with respect of the domain name and 3) that the defendant’s domain name has been registered and is being used in bad faith.17
The first element of the UDRP focuses primarily on the marks themselves without consideration of the parties’ goods or services. The relevant goods or services are not scrutinized because to do so would leave open the opportunity to avoid transfer by using the domain name in connection with differing goods or services. Second, the plaintiff must establish that the defendant has no legitimate interest in the use of the domain. If the defendant can provide a legitimate reason for registering the domain name, the defendant will avoid transfer. For example, if the defendant is generally known by a nickname that also happens to be the plaintiff’s mark or if the defendant can show that it has used the mark in connection with its goods or services and the use has been made in good faith, or that the domain name is used for non-commercial use.18 First Amendment non-commercial use defenses are rarely successful under the UDRP.19
The UDRP does not clearly define the term “use”, leaving open the interpretation of “use” by each panel. In fact, some panels have held that mere registration is not enough to satisfy the “use” requirement20 while other panels have found the mere registration combined with the offer to sell does constitute “use” under the policy.21 The second factor of the third prong requires that the plaintiff show a bad faith intent on the part of the defendant. Paragraph 4(b) of the UDRP sets out a nonexclusive list of factors that will support the bad faith requirement. The third prong of the test has become the wildcard under the UDRP. What’s more, since very little discovery is afforded to either party,22 the plaintiff must establish “bad faith” by using what is available in public records.
Under the UDRP, the plaintiff can only prevail against a defendant if the plaintiff can establish that the domain name is confusingly similar to the plaintiff’s trademark, the defendant has no legitimate interest in the domain name, that the defendant registered it in bad faith and, depending on the panel, that the defendant has done more than merely register it. In a case where the defendant’s conduct is found not to constitute “use”, neither the UDRP nor the FTDA will compel the transfer of the domain name.
On May 6, 2002, the International Trademark Association (INTA) released a response to two critical papers that called the reputation and effectiveness of the UDRP into question.23 INTA’s response makes it clear that INTA supports the UDRP and believes that it is an integral part of the domain name registration process and that the proceedings are fair to all parties. INTA responded to one author’s claim that the proceedings are biased in favor of the plaintiff. Plaintiffs who make a claim under the UDRP do so when the facts support their case, this is the reason why, INTA reports, plaintiffs prevail in the majority of cases, not because there is a bias towards plaintiffs.
The UDRP does not provide for an appeals process, however, the ACPA permits a party who has lost a UDRP decision to file an action to seek a remedy under the ACPA. WIPO has stated that a decision under the ACPA should be held de novo, even after a decision has been made under the UDRP.24
In 1999, Congress amended the Lanham Act by adding section 43(d), intended to aid trademark owners against sophisticated “squatters.” Under the ACPA, the plaintiff must first show that its mark is famous or distinctive; a distinctive mark is one that is inherently perceived as a trademark or one that through advertising or longevity has become known to be a trademark by the purchasing public. The plaintiff must also establish that its mark was famous or distinctive at the time the defendant registered its domain name. Second, the plaintiff must establish that the defendant registered, trafficked in, or used the domain name with a bad faith intent to profit.25 Liability will not be found where the facts show that the defendant has bone fide grounds for using the domain name.
The ACPA does not protect marks that are merely descriptive or generic for goods or services because these terms are not source-identifying terms. Once the plaintiff shows that its mark is famous or distinctive, the plaintiff must next establish that the defendant registered, trafficked in, or used the domain name with a bad faith intent to profit.
Unlike the FTDA and UDRP, the ACPA does not require a plaintiff to establish “use” of the mark in commerce, only that, at a minimum, the defendant registered the domain name with a bad faith intent to profit. The ACPA provides nine nonexclusive factors in determining whether the defendant has used the domain name with the requisite bad faith intent to profit. The bad faith requirement is the foundation of the ACPA and without it trademark owner would be faced with seeking redress under traditional law, the FTDA or the UDRP, all which have proven ineffective in many cases. The first appellate decision under the ACPA was decided by the Second Circuit in Sporty’s Farm L.L.C. v. Sportsman’s Market, Inc., 202 F. 3d. 489 (2d Cir. 2000).
The ACPA provides for statutory damages of no less than $1000 and no more than $100,000 per infringing use.26 The plaintiff may elect statutory damages over actual damages but the election must be made prior to the verdict in the case.27 Another benefit of the ACPA is that it provides for in rem jurisdiction over the domain name itself but only if the plaintiff can establish that it was diligent in obtaining personam jurisdiction over the defendant.28 Under an in rem cause of action, the trademark owner’s only remedy is for injunctive relief; no monetary damages are available.29 Unlike the UDRP, the ACPA clearly provides for broader First Amendment protection.30 The ACPA is not retroactive and may only be invoked for claims that have arisen after its enactment.31
The far-reaching effects of the ACPA are not yet known. However, a recently decided case in the U.S. District Court for the Eastern District of Virginia may be foretelling as to the long arm reach of the Act. In Barcelona.com Inc. v. Excelentismo Ayuntamiento de Barcelona, E.D. Va., Civil Action 00-1412-A, (February 2, 2002), the plaintiff sued the defendant for the use of the domain name Barcelona.com. Prior to trial, the defendant assigned the mark to a Delaware corporation. Judge Claude M. Hilton, presiding over the case, wrote that it is reasonable to believe that Congress intended non-US mark owners to utilized the ACPA, given that the Internet is an international activity and that this interpretation is in line with other federal government policy making activities regarding the Internet.32 Judge Hilton’s interpretation of the ACPA’sglobal reach may have debilitating effects on a court system that is already overused and overworked if other court’s too decide to interpret a far reaching grasp of the ACPA.
The ACPA has made it possible to prevent “squatting” in instances where the previously available tools proved ineffective, but at what cost? It appears that the ACPA’s statutory damages may have a chilling effect on fair use and FirstAmendment rights. What ever the cost may be, one thing is certain, with the enactment of the ACPA most, if not all, “squatters” will find a hard time finding safe havens from the law.
Submitted by Roger H. Bora, Esquire, United States Patent and Trademark Office, who may be reached at firstname.lastname@example.org.
- 1. See P. Wayne Hale, The Anticybersquatting Consumer Protection Act & Sporty’s Farm L.L.C. v. Sportsman’s Market, Inc., 16 Berkley Tech. L.J. 205, 207 (2001).
- 2. Lanham Act Section 45.
- 3. See Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 875 (9th Cir. 1999) (citing I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 46 (1st Cir. 1998).
- 4. Lanham Act Section 43(c).
- 5. See Avery at 879-80; see also Academy of Motion Pictures Arts & Sciences v. Network Solutions, Inc., 989 F. Supp. 1275 (C.D. Cal. 1997); see also Panavision International, L.P. v. Toeppen, 141 F.3d 1316, 1324 (9th Cir. 1998).
- 6. See Panavision International, L.P. v Toeppen, 141 F.3d 1316, 1324 (9th Cir. 1998).
- 7. Id. at 1325.
- 8. Blurring occurs when a famous trademark is used without the permission of the trademark owner and is used in connection with dissimilar goods or services, thus weakening the marks ability to distinguish the owner’s goods and services from others.
- 9. Tarnishment occurs when a famous trademark is placed in bad light, this has occurred with domain names being used in connection with adult content websites.
- Panavision International, L.P. v. Toeppen, 945 F. Supp. 1296, 1304 (C.D. Cal. 1996) (The Court citing 15 U.S.C. Section 1127, which states “The term ‘dilution’ means the lessening of the capacity of a famous mark to identify and distinguish goods or services.”
- See Id.
- Panavision 141 F.3d 1316 at 1327.
- Hale, supra note 1 at 222.
- ICANN was formed in October 1998 as a non-profit corporation to take over the assignment of Internet domain names.
- Go to ICANN’s website at www.icann.org/dndr/udrp/approved-providers.htm to view approved providers for Uniform Domain-Name Dispute-Resolution Policy.
- Uniform Domain Name Dispute Resolution Policy paragraph 4(a) at www.icann.org/dndr/udrp/policy.htm
- Go to www.icann.org/dndr/udrp/policy.htm
- Go to www.icann.org/dndr/udrp/policy.htm
- See William H. Brewster, James A. Trigg and John R. Renaud, Resolving the Clash Between Trademarks and Domain Names, 42 Santa Clara L. Rev. 63, 75-78 (2001).
- See Cyro Indus v. Contemporary Design, WIPO Case No. D2000-0336 (June 19, 2000).
- See World Wrestling Fed’n, Inc. v. Bosman, WIPO Case No. D99-0001 (January 14, 2000)(defendant’s offer for sale constituted use); see e.g., Telstra Corporation Limited v. Nuclear Marshmallows, WIPO Case No. D2000-003 (active steps by defendant to conceal its identity constituted bad faith use even where defendant had not used the domain name); Barney’s Inc. v.BNY Bulletin Board, ICANN Case No. D2000-0059 (bad faith use found despite lack of any commercial activity using the domain name or related website, where defendant engaged in negotiations for transfer of the domain name).
- Brewster, supra note 17 at 68.
- To read INTA’s response, go to www.inta.org/press/pr2002_09.shtml.
- Go to www.sidley.com/cyberlaw/features/wipo.asp
- See Trademark Act Section 43(d).
- U.S.C. 1117(d).
- See Morrison & Foerster LLP v. Wick, 94 F. Supp. 2d 1125, 1136, (D. Colo. 2000).
- 15 U.S.C. 1125(d)(2)(A).
- Id at 1125(d)(2)(D).
- Brewster, supra note 17 at 78; see also Panavision 945 Supp. 1296 at 1303 (quoting Sen. Orrin G. Hatch (R-Utah), the Chairman of the Senate Judiciary Committee, “the bill will not prohibit or threaten noncommercial expression, such as parody, satire, editorial and other forms of expression that are not part of a commercial transaction) see also, Dr. Seuss Enterprises, L.P. v. Penguin Book USA, Inc., 924 F. Supp. 1559, 1573-74 (S.D. Cal. 196) (holding that parody used to sell more of defendant’s book at issue, was expressive and not within commercial use).
- See Ryan Isenberg, Trademarks and the Internet, 32 U. West. L.A. L. Rev. 229, 237 (2001).
- Barcelona.com. At 373-374.