OnTheInternet Logo
OTI TextOTI Link

October 2000
Screen Version


Trademarks and Domain Names: The New Remedies
They may be better than you think

By Carol Anne Been <cab@sonnenschein.com>
and David W. Maher <dwmaher@ibm.net>

There are new remedies available for infringement of trademarks arising from registration and use of second-level domain names in the Internet's domain name system (DNS). The much maligned, but much used, Dispute Policy of Network Solutions, Inc. (NSI), is now history. It may be mourned by the owners of registered trademarks, but most trademark owners will find that the new arsenal of weapons against infringement are perhaps even better, especially when dealing with the cyberpirate, or cybersquatter.

For the uninitiated, a bit of history to begin. The DNS is a global system for identifying networks connected to the Internet. The top-level domains include the familiar .com, .net, and .org, as well as the two-letter country-code top-level domains (ccTLDs) such as .uk (United Kingdom), .de (Germany), and .cn (China). There are approximately 250 ccTLDs. All top-level domains are equally accessible anywhere in the world. Second-level domains are the names immediately to the left of the dot in the top-level domain. For example, in sonnenschein.com, the top level is .com and the second level is sonnenschein. Trademark infringement issues arise from the use of names and marks in the second level. Cybersquatting and cyberpiracy are the common terms for the bad-faith registration of another's name or mark by the registrant of a second-level domain name.

The year 2000 opened with both a new anticybersquatting law in the United States and a new domain-name dispute-resolution policy adopted by the Internet Corporation for Assigned Names and Numbers (ICANN). Both the law and the dispute-resolution policy target bad-faith registration of domain names. The dispute policy formerly administered by Network Solutions has been replaced completely by the new ICANN policy.

Anticyberpiracy Law

On November 29, 1999, an omnibus intellectual property law went into effect that included the Anticybersquatting Consumer Protection Act. This act makes the bad-faith registration of domain names in the .com, .net, and .org domains a new type of trademark infringement. By its terms, the act applies to all domain names assigned by any registration authority, but there are as yet unresolved jurisdictional questions regarding remedies for infringement arising from registration in a ccTLD. If the registration authority of a ccTLD is located outside the United States, it seems unlikely that the act would apply unless jurisdiction were available on some other grounds.

Under the law, which is codified as new section 43(d) of the Trademark Act (Lanham Act), anyone who in bad faith registers, traffics in, or uses a domain name that infringes or dilutes another's trademark has committed trademark infringement. Factors involved in assessing bad faith focus on activities typically associated with cyberpiracy or cybersquatting, such as whether the registrant has offered to sell the domain name to the trademark holder for financial gain without having used or intended to use it for a bona fide business; whether the domain-name registrant registered multiple domain names that are confusingly similar to the trademarks of others; and whether the trademark incorporated in the domain name is distinctive and famous. Other factors are whether the domain name consists of the legal name or common handle of the domain-name registrant and whether the domain-name registrant previously used the mark in connection with a bona fide business. The complaining trademark owner does not need to own a trademark registration for the mark that was incorporated into the domain name.

The act does not provide recourse against incorporation of another's trademark into a domain name on legitimate grounds or under the belief that the use was a fair use or otherwise lawful.

If bad-faith cyberpiracy is established, the trademark owner may be entitled to an order requiring forfeiture or transfer of the domain name, as well as the remedies available in other trademark cases: damages, profits, and fees. In addition, the trademark owner may elect to recover statutory (presumed) damages from $1,000 to $100,000 per domain name in lieu of actual damages and profits. Statutory damages, although long available for copyright infringement, are a new form of remedy in trademark law.

The act also protects a domain-name registrant from a trademark owner who knowingly and materially misrepresents to a registrar that a domain name infringes on a trademark. Remedies available to the domain-name registrant are reactivation of the domain name and damages against the trademark owner.

For those situations when the domain-name registrant cannot be identified or found despite a reasonable effort, the act allows an in rem action against the domain name itself to obtain forfeiture or transfer of the domain name.

Two decisions under the act give us some insight into its application. In what appears to be the first decision under the act, in late January 2000, a federal magistrate recommended to a Virginia federal judge that a default judgment be entered against two dozen domain names that were the subject of an in rem action, which would make the names transferable to the plaintiff, Bell South. In the first appellate decision under the act, the Second Circuit federal appeals court applied the act to a case pending on appeal. The court held that the defendant had registered a domain name that incorporated the name of the defendant's competitor and then sold the domain name to its subsidiary in a different line of business to keep the domain name away from the competitor. While the court noted that those circumstances did not fit neatly into the factors enumerated in the act, it found bad faith in this conduct.

The act has some advantages: it provides a basis for a temporary restraining order or preliminary injunction prior to full adjudication, it allows damages, and it allows all trademark and unfair competition claims to be brought in one forum. The disadvantage of the act is that it entails all of the usual costs of litigation in a U.S. federal court. For parties who would prefer to avoid the expense and delay of litigation, the ICANN policy is a viable, speedy alternative.

ICANN Uniform Domain Name Dispute Resolution Policy

On October 24, 1999, a new Uniform Domain Name Dispute Resolution Policy was promulgated by ICANN, a California not-for-profit corporation that has assumed some of the duties of administration of the DNS. ICANN operates under close supervision by the U.S. Department of Commerce. NSI, the largest domain-name registrar, adopted the ICANN policy shortly thereafter, and in November 1999 NSI ceased processing disputes under its old policy. Domain names that were placed on hold under the old NSI policy are now being reactivated, and parties may seek relief under either the new ICANN policy or the new Anticybersquatting Consumer Protection Act. The ICANN policy differs from the prior NSI policy-which had been in effect since 1996-in three key respects. Under the new ICANN policy:

To assess bad faith, the ICANN policy considers factors similar to those listed in the new U.S. act. Registering a domain name for the purpose of selling or renting it to the trademark owner, or to prevent the trademark owner from registering that domain name, or for the primary purpose of disrupting commerce or diverting customers is indicative of bad faith. Legitimate registration of a domain name may be shown by preparation to use the domain name in connection with bona fide business, by incorporation into the domain name of a name by which the domain-name holder is commonly known, or by use of the domain name for a noncommercial purpose or other fair use with no intent of commercial gain or of tarnishing a mark. The specific goods and services of the parties involved may be taken into account.

Disputes under the ICANN rules are referred to a one- or three-member administrative panel that decides the dispute promptly and publishes the decision. The administrative decision is final and binding on the registries and registrars subject to ICANN control, but it can be superseded by court action. The proceeding is intended to be fast and inexpensive, to be conducted by e-mail with no personal appearances, and to require minimal production of documents (unless voluntarily offered by the parties or requested by the panel). The policy also offers some protection to the domain-name holder, who may have legitimate rights to a domain name. The policy permits the panel to rule that the complaint was brought in bad faith to "reverse hijack" the domain name or to harass the domain-name holder. Relief for such conduct is limited to a declaration of abuse of the administrative proceeding.

The first dispute under the ICANN policy was decided on January 14, 2000, and has been published by the World Intellectual Property Organization (WIPO), which provided the single panelist. In World Wrestling Federation Entertainment, Inc. v. Michael Bosman, the domain name at issue-"worldwrestlingfederation.com"-was registered by Bosman through an Australian domain-name registrar. The panel found bad faith under the relevant factors in light of Bosman's own statement that his primary purpose in registering the domain name was to sell it to the WWF. Although Bosman had not established a Web site under the disputed domain name, the panel found "use" in Bosman's offer to sell the domain name to the WWF. The decision required transfer of the domain-name registration to the WWF.

As of April 7, 2000, there were 455 proceedings pending or decided under the new ICANN policy, involving 657 domain names. There have already been 144 decisions-112 favoring the party that brought the case, ordering either transfer or cancellation of the domain name, and 29 favoring the holder of the domain name. Three dispute-resolution service providers have been approved by ICANN. A complainant may choose any of the three, and the complainant pays the applicable fee, unless the respondent requests a three-person panel, in which case complainant and respondent split the fees equally. The three service providers are WIPO, the National Arbitration Forum (a U.S. entity), and e-resolution (a Canadian entity). The fees for a single neutral panelist range from $525 for e-resolution to $1,000 for WIPO. The schedules of fees are posted by each provider, and an up-to-date list of providers can be found at http://www.icann.org/udrp/approved-providers.htm. One limitation on the usefulness of the ICANN policy is that it is a hybrid of mediation and arbitration. By the terms of the policy, neither party to a proceeding is barred, at any time, from resort to litigation in any court of competent jurisdiction. Any final judgment by such a court will supersede any ruling by an ICANN dispute-resolution service provider.

Other Remedies and Open Issues

Legitimate Overlapping Uses Not Yet Addressed Neither the Anticybersquatting Consumer Protection Act nor the ICANN policy addresses the trickiest situations on the Internet, which arise when there are two legitimate claimants for a particular domain name, such as geographically remote users ofthe same name or companies selling entirely different types of goods or services. It remains to be seen whether the new law or policy will be stretched to accommodate such scenarios in some fashion. In any event, parties still may pursue litigation under traditional trademark infringement, dilution, and unfair competition principles and let the courts decide how to resolve such good-faith disputes.

Disputes Involving Domain Names in ccTLDs The ccTLDs are generally considered to be split into two classes: open and closed. The open ccTLDs offer domain-name registrations to all comers regardless of where registrants may reside. They are more often operated by small countries or dependencies that are not truly independent countries. Examples are Moldova, whose ccTLD is .md,and Touvalou, an atoll in the Pacific Ocean, whose ccTLD is .tv. Both of these have offices in New York and are seeking registrants in the United States.

The closed ccTLDs generally restrict registration to residents or to resident owners of companies or trademarks registered in the country. Most of the major European countries are in this category.

There have already been a number of cross-border trademark domain-name-infringement cases. In at least one case, both U.S. and U.K. courts had jurisdiction over the parties and both courts rendered judgments.

The ICANN policy is not applicable at this time to registrations in any ccTLD except for a handful, such as .ni (the island of Niue), an open ccTLD that has voluntarily made adherence to the ICANN policy a condition of registration in that domain.

The upshot is that a trademark infringement arising from a registration in any ccTLD-open or closed-will probably have to be adjudicated by a court in the country of the ccTLD. An exception might be the cases such as .md and .tv, where the registration authorities are arguably doing business in the United States and may be amenable to service of a complaint under the U.S. Anticybersquatting Consumer Protection Act. Other exceptions could arise if jurisdiction is otherwise available beyond the borders of the country operating the ccTLD.

Conclusion

This is a rapidly changing area of law, and additional remedies may become available in the near future. Some U.S. state legislatures are considering state remedies, and there is the remote possibility that ICANN may acquire jurisdiction over ccTLD registrations, with the result of broader imposition of the ICANN policy.

In general, the advantages of the ICANN policy are clearly its speed, its low cost, and its ability to resolve cross-border disputes. If a remedy is available under the Lanham Act, as amended by the Anticybersquatting Consumer Protection Act, the advantages are final adjudication and the availability of damages.


Join the Internet Society today: http://www.isoc.org