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Counterfeit Marks and Counterfeit Goods: Pretense in Cyberspace

The term “counterfeit” is defined under U.S. trademark law as “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. § 1127 (Lanham Act, Sec. 45). Used as a noun, domain names ultimately found to have been registered in bad faith make their registrants cybersquatters by definition. But more commonly we encounter counterfeiting as an adjective as it applies to spurious goods (counterfeit goods) –“made in exact imitation of something valuable or important with the intention to deceive or defraud.” Webster’s Ninth New Collegiate Dictionary. Remedies for noun infringement is the special province of the Uniform Domain Name Dispute Resolution Policy (UDRP) and the Uniform Rapid Suspension Policy (URS), while adjectival infringement is only actionable under statutory law. Under U.S. trademark law noun claims can be joined with adjectival claims under the Anticybersquatting Consumer Protection Act (ACPA) which is a section of the Lanham Act.

Under the plain language of 15 U.S.C. §1114, offers to sell infringing or counterfeit items establishes liability for trademark infringement and counterfeiting. Levi Strauss Shilon, 121 F.3d 1309, 1312 (9th Cir.1997) is an example of an adjectival claim; no domain name issues at this early date. An example of noun plus adjectival claims in federal court is Tony Burch v. Yong Shen International Trade Co, 10-cv-09336 (SDNY 2011, 2012, 2013) in which there were ultimately hundreds of counterfeit domain names; in fact, domain names continued to be registered even after the court entered judgment for a permanent injunction, hence the need for supplemental orders in later years.

While there have been claims in the hundreds (and some in the thousand-plus) of domain names under the UDRP Tony Burch has never used that forum for its noun claims, probably seeing the two types of claims as interconnected with stronger remedies available under statutory law. The URS is a possible alternative for a quick turnaround in shutting down cyber outlets for counterfeit goods; several awards have been filed, but not involving multiple domain names. Douglas Isenberg discussed a recent URS decision involving 474 counterfeit domain names although not specifically connecting them to counterfeit goods. See his recent commentary on Ashley Furniture Industries, Inc. v. Fahri Hadikusuma et al. FA1611001703352 (Forum December 21, 2016).

In Ashley Furniture, the counterfeit domain names were being passively held; although no mention of spurious goods, they were possibly destined to offer them. “Interestingly [Mr. Isenberg says], the Forum (the largest provider of URS services), has a fee schedule that specifies a filing fee of $375 for a URS complaint containing 1-14 domain names; while the upper end of the schedule maxes out at $500 for “101+” domain names.” That would make it ideal for a Tony Burch like complaint for noun claims to be filed under the URS.

The problem in noun and adjectival counterfeiting cases is likelihood of a never-ending game of whack a mole. The creative solution in Levi Strauss and Tony Burch was to attach the accounts (PayPal in these cases) and in Tony Burch two further acts of creative lawyering by uniting that relief with a permanent injunction enjoining named registrars “from providing services” to any of the defendants and keeping jurisdiction with the court to deal with further infringements by the same defendants, which of course is not possible under the UDRP or URS. Attaching accounts is not a perfect solution because there are other ways of taking payment inaccessible to brand owners.

Infringers are unlikely to make an appearance against counterfeiting claims in either forum but only noun claims are actionable under the UDRP and URS. Proof of adjectival infringement only goes to establish respondents’ lack of rights and legitimate interests. Once the evidence is laid out for adjectival infringement there’s no defense on the issue of rights or legitimate interests (Paragraph 4(a)(ii) of the UDRP); noun counterfeiting is conclusive against respondents on the bad faith element (Paragraph 4(a)(iii) of the UDRP).

The consensus view of Panels in both UDRP and URS is that respondents’ use of domains to sell counterfeit versions of a complainants’ products do not constitute bona fide offerings of goods or services or a legitimate noncommercial or fair use. SCG Power Rangers, LLC v. hongyan yao, FA1612001705455 (Forum January 6, 2017) (<power.ranger.us>) citing eLuxury.com Inc. v. WangJunJie, FA 1075554 (Forum November 30, 2007) (concluding that the sale of counterfeit products is evidence that the respondent does not make a bona fide offering of goods or services or a legitimate noncommercial or fair use of a disputed domain name).

For a more recent URS see  Zeltiq Aesthetics, Inc. v. WhoisGuard, Inc., FA1611001703695 (Forum December 8, 2016) involving a plain vanilla noun infringement in two senses (infringing name and mimicking complainant’s website): “Respondent has registered and is using CoolSculpting.fit to display a counterfeit website designed to resemble an authentic provider of CoolSculpting services … and encourages visitors to input personal information in order to ‘Enter to Win Free Coolsculpting.’”

A recent UDRP case featured both noun and adjectival infringements: “Complainant has submitted reliable evidence showing [domain name resolving to] a website that sells (seemingly counterfeit) shoes in competition with Complainant.” Costco Wholesale Membership, Inc. v. Songyuan Songyuan,FA1610001697262 (Forum October 27, 2016) (<costco-eshop.top>). The adjectival infringement establishes both lack of rights and legitimate interests, and when the Panel moves on to its Paragraph 4(a)(iii) analysis, bad faith use, from which bad faith registration is inferred.

To round out recent cases for noun infringement resting on offering counterfeit goods there is Bayerische Motoren Werke AG v. MIKE LEE / WHOISGUARD PROTECTED, WHOISGUARD, INC., Yang Xiao, Xiao Yang, Ning Li, Li Ning, MIKE LEE, D2016-2268 (WIPO January 6, 2017) (<bmw-icom.com> and several others). The domain names resolved to websites selling or linking counterfeit BMW proprietary diagnostic software products. This establishes respondent lacked rights or legitimate interests and by inference from its use that the registrations of the domain name were abusive. (The Respondents did not formally reply to the Complainant’s contentions but complained about being singled out. One of the Respondents sent an email “protesting why the proceeding has been brought against them when there are other examples of misuse, e.g., <bmw-icom.org>.”

Respondent in Fifty Shades Limited v. Domain Admin / Whois Privacy Corp., FA161100 1704616 (Forum January 17, 2017) (<fiftyshades2.com>) attempted to hide infringing, adjectival infringement by removing content from the website but it was captured by the “Wayback Machine” (https://archive.org/web). When active the website sold counterfeit copies of the copyright works, in whole and part, without Complainant’s authority

The important point to note is that while adjectival infringements are factors supporting bad faith use they are not themselves actionable claims under the UDRP and URS. There must be a noun infringement otherwise complainant will have no standing to complain. Adjectival claims must be litigated as trademark and counterfeiting infringements in courts of competent jurisdiction.

Mr. Levine is the author of a treatise on trademarks, domain names, and cybersquatting, Domain Name Arbitration, A Practical Guide to Asserting and Defending Claims of Cybersquatting under the Uniform Domain Name Dispute Resolution Policy. (Legal Corner Press, 2015). Learn more about the book at Legal Corner Press. Available from Amazon and Barnes & Noble.  Ongoing Supplement and Update here.  Supplement and Update through August 2016 was published in e-book format on November 1, 2016; the print format will be published on February 15, 2017. The Supplement and Update is also available in pdf format free on the publisher’s website, www.legalcornerpress.com/dna-supplement.

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