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Overreaching: Priority of Rights to Domain Names

Complainants whose trademarks postdate domain name registrations continue to misunderstand the law as it applies to their rights under both the Uniform Domain Name Dispute Resolution Policy (UDRP) and the Anticybersquatting Consumer Protection Act (ACPA).While cyberspace has unlimited capacity (assuming availability of power) and plenty of room for everyone who wants to be there only one party can lawfully occupy an address at any one time, and that party is not necessarily the trademark owner. Both the UDRP and ACPA are dedicated to evicting squatters, but not all holders of domain names corresponding to trademarks are squatters. Priority of right or legitimate interest is a significant factor in determining whether there is an actionable claim for cybersquatting under either regime.

In their misunderstanding, owners of trademarks acquired after (and sometimes years after) domain name registration receive hot comfort from some UDRP panelists who take the position that registration renewal is a triggering event for determining bad faith. If taken as mantra this is a reckless position: it undermines consistency and predictability of the UDRP to have panelists rejecting precedent (consensus) of a fundamental principle. As construed from the first case in the UDRP database (a position, incidentally, renounced by the Panel that crafted it!) complainant must prove respondent registered the domain name in bad faith AND is using it in bad faith. If there is good faith registration but subsequent bad faith use the dispute does not belong in an administrative proceeding. If the new use spells out a claim for trademark infringement it belongs in federal court. See, for example, Newport News, Inc. v. Vcv Internet, AF-0238 (eResolution July 18, 2000), Respondent prevailed under UDRP and lost it in Newport News Holdings Corporation v. Virtual City Vision, Incorporated, d/b/a Van James Bond Tran, 650 F3d 423 (4th Cir. 2011).

I think we’re seeing a consequence of this rejection of precedent by some Panels in a recent ACPA action, Office Space Solutions, Inc. v. Kneen, 1:15-cv-04941 (SDNY July 2015), commenced and voluntarily dismissed after plaintiff received what I understand to have been an earful from the court during argument on plaintiff’s motion for a preliminary injunction (what the judge said is surmise on my part because I haven’t yet seen the transcript). I’ll come back to this case in a moment. I’ve dealt with the renewal issue in an earlier Blog, “Getting it Wrong: It Happens!” so I won’t repeat it here. The consensus is firm in holding that renewal is not a triggering event for bad faith even with proof of bad faith use. Panels that hold otherwise are outliers. The UDRP is not a stand-in for the ACPA or the Lanham Act.

Owners of arguably suggestive generic terms and descriptive phrases registered or claimed as trademarks have no privileged rights to domain names whether or not the trademarks existed prior to domain name registrations. For domain names postdating the mark (particularly for weak marks) there must be proof that respondent had complainant in mind, but resting a right solely on having a trademark—and even worse when the domain name predates the trademark— as though that were the only proof required merely exposes the party’s (and frequently counsel’s) ignorance of the law. This happens with some frequency in UDRP disputes and, as I say, has spilled over to federal court with the Office Space Solutions case.

The general rule for UDRP disputes is that priority of registration is determinative of the lawfulness of occupancy whether or not domain names are identical or confusingly similar to trademarks; this rule is conclusively so where domain name registrations precede the existence of complainants’ trademarks, but not necessarily where trademarks predate domain names. So, for example, the Complainant in Playa Games GmbH v. CBS Interactive Inc., 100980 (ADR.eu July 6, 2015) had two pending trademark applications but no demonstrable common law right to <sfgame.com>. In that case Respondent had a two-year priority of registration; the Panel held that commencing the proceeding constituted a reverse domain name hijacking. If this case had started in federal court; or if Complainant now (foolishly) decides to commence a federal action it will be exposed to statutory damages up to $100,000.

The worst offense is by newly minted trademark holders who believe they have a “better right” than the domain name holder (the Office Space Solutions facts). Playa is a good illustration of this in the UDRP forum; so is Wirecard AG v. Telepathy Inc., Development Services, D2015-0703 (WIPO June 22, 2015) where Respondent registered <boon.com> fifteen years earlier than the existence of the trademark. Complainant’s claim was driven by shock it would have to pay a large sum of money to obtain the domain name. However, a domain name holder infringes no one’s rights by valuing its digital asset in an amount the trademark owner is unwilling to pay.

Without any understanding of what the evidentiary demands are under section 4(b)(1) of the Policy, Complainant argued that Respondent was in violation because it was offering to sell the domain name for an amount greater than the documented cost of acquiring it. A unanimous three-member Panel in Wirecard held:

It is unnecessary to consider in any detail the Complainant’s arguments relating to the Respondent’s offer to sell the disputed domain name to the Complainant. Suffice it to say that, even if the disputed domain name had post-dated the Complainant’s trade mark, this contention would have failed. In the absence of any evidence from the Complainant that the Respondent had registered the disputed domain name with reference to the Complainant, the Respondent was fully entitled to respond to the unsolicited approach from the Complainant by asking whatever price it wanted for the disputed domain name . . . . The Panel sees nothing remotely “fraudulent” in such behaviour.

Other recent UDRP cases include Apmetrix Inc. v. DOMAIN ADMIN, FA1505001618846 (Forum June 24, 2015) (<appmetrix.com>) (Domain registered 5 years before trademark acquisition). The evidentiary problem in all these cases is that the trademark did not exist when the domain name was registered so there could not possibly be a UDRP violation absent some psychic divination that Complainant would in the future adopt a trademark corresponding to the earlier registered domain name.

Plaintiff in Office Space Solutions had the same evidentiary problem. Although the ACPA is built on a different model than the UDRP in that cybersquatting can be proved if defendant either registered OR used <workbetter.com> in bad faith, it too requires the mark “be distinctive at the time of registration of the domain name.” Lanham Act, §1125(e)(1)(A)(ii). The complaint reads in relevant part as follows:

1. Since May 19, 2015, the Plaintiff has been and is now the title owner of Registration No. 4740626 for the Service Mark WORK BETTER in International Class 35.

2. Defendant is engaged in the practice of re-selling over one hundred domain names through the website Jasonified.com, which is registered to the Defendant.

* * * *

23. The Defendant renewed and/or updated the registration for workbetter.com on February 7, 2015.

24. Workbetter.com is virtually identical to, and/or confusingly similar to the WORK BETTER Service Mark, which was distinctive at the time that the Defendant renewed and/or updated the registration of workbetter.com.

However, defendant registered the domain name in 1999 when the trademark was not distinctive; indeed, probably, when plaintiff’s principals were still in high-school. The complaint continues:

25. The Defendant is not using workbetter.com. He is simply holding the domain name with a bad-faith intent to profit from the WORK BETTER Service Mark. [My heavens!]

Then, we come to the kicker:

27. Upon information and belief, the Defendant intends to, in bad-faith, sell workbetter.com to Plaintiff at a price much higher than registration and maintenance fees for workbetter.com.

This presupposes that the business of buying, selling, and holding domain names in inventory is unlawful in itself, which it isn’t as UDRP Panels have overwhelmingly affirmed. Plaintiff’s entire cases rests on the concept that renewal after trademark acquisition gives it a better right to a domain name when defendant’s motivation is to profit from selling it. But, buying and selling of domain names is no different than any other kind of investment; there’s always the risk that the costs will exceed the benefits, except where a newly minted trademark owner, who has failed to do its due diligence for a corresponding domain name, suddenly realizes that the domain name is owned by someone else.

I’m shocked; utterly shocked a domain name business owner would want to capitalize on its assets! I suppose Judge Kaplan delivered the same message.

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. (2015, 558 pages). Learn more about the book at Legal Corner Press. Available from Amazon and Barnes & Noble.  Ongoing Supplement here

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