Cybersquatters registering domain names of well-known companies face new perils by engaging in these activities. The Anticybersquatting Consumer Protection Act, signed by President Clinton on November 29, along with dispute resolution procedures effective on January 3, 2000 by the International Corporation for Assigned Names and Numbers (ICANN), makes it more difficult to profit from the name and goodwill of other companies. Cybersquatters register trademarks and well-known brand names of legitimate companies. In many cases, they sell the name back to the rightful owner at a significant profit.
Typically, courts have ruled that domain name registration of a corporation’s trademark is actionable as a trademark violation. Notably, in Panavision International v. Toeppen, a federal court made it easier to seek relief by holding that a significant purpose of a domain name is to identify the entity that owns the Website. Therefore, Toeppen diluted the value of Panavision’s well-known name by simply having a domain name registration identical to Panavision’s. Since trademark law protects marks connected with the distribution of goods, however, some courts have dismissed claims against cybersquatters that have not made commercial use of the disputed domain name. This leaves business and famous name owners without a remedy under trademark law.
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The Anticybersquatting Act adds a new section to the Trademark Act of 1946. The Act prohibits bad-faith registration or use of an Internet domain name that infringes on a trademark. It also offers protection to those with famous names.
Additionally, the Anticybersquatting Act creates risks for cybersquatters by adding a provision for statutory damages of between $1,000 and $300,000. This eliminates the need to demonstrate damages by proving actual harm. Moreover, the Act allows an action directly against an offending site in the event that the domain name owner cannot be located. In the past, courts have been unwilling to allow such “in rem” actions directly against property instead of against an individual. As a result of this new provision, domain name registrars can be drawn into a lawsuit with a court order to remove or transfer an offensive domain name. This has the added advantage of obtaining relief in a court where the registrar is located even where the infringer is beyond the jurisdiction of a convenient court.
The new ICANN dispute resolution procedure requires mandatory arbitration in the event of a domain name challenge. The dispute must involve a domain name that is identical or confusingly similar to a trademark or servicemark, where the domain name holder has acted in bad fatih with no legitimate reason to register the mark. Bad faith includes registration for the purpose of selling the domain name to the trademark holder, to disrupt the business of a competitor or to attract visitors through use of a well-known name.
The ICANN dispute procedure offers significant improvements from the prior dispute policy of its predecessor, Network Solutions. Network Solutions complaint procedure only provided a remedy in the event that a domain name that was identical to a federal trademark was registered later in time. In that case, the cybersquatter had to demonstrate that he also possessed a valid trademark through federal registration in any country. All other disputes had to be raised in federal courts resulting in delayed relief, if any, and substantial legal fees.
Under the ICANN dispute procedure, a complaint can be resolved by a single arbitrator for a fixed fee of about $1,000. The intent of the dispute process is prompt resolution by qualified experts who are familiar with these disputes. The World Intellectual Property Organization (WIPO) was approved earlier this month as the first dispute resolution service provider. WIPO has designated a list of intellectual property specialists from around the world to act as arbitration panelists.
The Anticybersquatting law and the ICANN dispute procedure will abruptly halt the activities of most cybersquatters. The ICANN procedure is fast and the fees are relatively inexpensive. Should legal action be necessary, cybersquatters could face substantial civil penalties. The infringing cybersquatter need not even be identified or located to seek relief directly from domain name registrars. Ultimately, many lawsuits will likely be initiated now that the law has teeth to provide effective remedies for trademark and famous name holders.
The trademark system and domain name registration system will continue to exist independently while sometimes performing the similar task of creating brand recognition. Therefore, it is important to maximize protection by reserving domain names for registered trademarks and obtaining federal trademark rights for domain names. For information concerning domain name registration and dispute procedures visit ICANN’s website at www.icann.org, and for information concerning federal trademark rights visit the U.S. Patent and Trademark’s website at www.uspto.gov.
Kevin J. McNeely chairs the Technology Law Group for Partridge Snow & Hahn LLP. He can be reached for comment at kjm@psh.com.
