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Transfers of Domain Names Contemporaneous with Complaint: Cyberflight?

Cyberflight (defined as strategically transferring accused domain names to another registrar or registrant upon receipt of a complaint) was a sufficient irritant by 2013 for the Internet Corporation for Assigned Names and Numbers (ICANN) to adopt recommendations to amend the Rules of the Uniform Domain Name Dispute Resolution Policy (UDRP). Effective July 1, 2015 the Rules now include a requirement for locking the domain (Rule 4(a)); as well as a change in the timing of transmitting the complaint to respondents (Rule 3(b)). Before the amendment there had been no uniform approach to locking.

The amendment makes locking mandatory. It provides that the lock shall be applied “[w]ithin two (2) days of receiving the Provider’s verification request.” To assure the Respondent is not forewarned of the filing of the complaint and take flight to another registrar the “Registrar shall not notify the Respondent of the proceeding until the Lock status has been applied” (Rule 4(b)). Prior to the change of rule complainants were required to “[s]tate that a copy of the complaint . . . has been transmitted to the Respondent” (former Rule 3(b)(xii)), which gave respondents plenty of time to change their registrations and delay the proceedings. Currently, “[t]he lock shall remain in place through the remaining Pendency of the UDRP proceeding.”

While locking domain names effectively ends cyberflights, accusations of improper transfers are still actionable. The question in Randall E. Kay v. Sebastian Kleveros / Comcept – Internet Ventures, FA1602001659119 (Forum March 18, 2016) (majority decision) was whether transfer of to a new registrant completed after but initiated before the complaint was cyberflight, which to the Complainant it appeared to be, or whether the timing was coincidental (having the appearance of cyberflight). Even the appearance of cyberflight in a non-defended case has determinative consequences as illustrated in the last cyberflight matter before the rule change, David Briggs Enterprises, Inc. v. MARY DANNA, FA1503001611862 (Forum May 26, 2015) (<fattuesday.com>).

Properly assessing the theory of the action, whether cyberflight (paragraph 8(a)) or bad faith (paragraph 4(a)(iii)) is important because transferees are vulnerable to claims of infringement even where original registrants would not have been. It all depends on the timing and use of the domain name. Complainant in Randall E. Kay filed obtained its trademark registration for NVRT on December 22, 2015, and although the mark may arguably have been used in commerce before that (which was highly unlikely since the statement of use was filed the previous month!), the transferee’s registration of predated Complainant’s use of the trademark. Therefore, timing of the transfer to Respondent—when initiated, when completed—and clarity of transferor’s/transferee’s intentions were particularly important in rebutting Complainant’s claims that Respondent lacked rights or legitimate interests and bad faith. Respondent’s counsel made a masterful presentation in detailing the steps of the transaction, which is evident from the Panel’s summary:

By a unanimous vote, the Panel finds there are a series of coincidental circumstances that might be interpreted as bad faith “cyberflight”. However, examining the records produced by Respondent (and also noting the fact the person who sold the 41 domain names to Respondent failed timely to update the WHOIS information as required by ICANN), the Panel finds that there was no “cyberflight”. Respondent’s registration and transfer was legitimate (although it occurred over multiple days and in several steps). Respondent’s email correspondence between “Tim Schoon” and “Sebastian Kleveros” discussing the transfer occurs on January 11, 2016, before this proceeding began.

Although the vote was unanimous as to coincidental timing of the transaction, the Panel was not unanimous as to rights and legitimate interests and bad faith. For the majority, Respondent’s submission was more than sufficient to establish its credibility; it undermined the argument that the transaction and the proof were manufactured to bolster a defense:

Apart from those issues, the substance of this case in the opinion of the majority is that a bad faith finding would be inappropriate because Respondent bought the domain name as part of a commercial transaction involving 40 other four-letter domain names. On the evidence, Respondent had no intent or knowledge of any potential infringement on Complainant’s rights.

Once the Panel unanimously determined that the record did not support cyberflight the issue simplified to whether the transferee was liable for a paragraph 4(a) (iii) infringement as a postdating registrant. Respondents who specialize in certain types of domain names that are either short strings of random letters or acronyms that could possibly be claimed by a number of trademark owners are demonstrably using them for legitimate business purposes under paragraph 4(c)(i) of the Policy.

For the dissent it mattered only that the transaction was completed after Complainants acquisition of the trademark: “[t]o allow such an absurd construction [that is, that reselling domain names from the website was a bona fide offering under paragraph 4(c)(i) of the Policy] would eviscerate the UDRP because every respondent could demonstrate rights by simply offering the relevant domain name for sale to the general public at the time of registration. The UDRP could be easily circumvented.” This concern may be true for inherently distinctive trademarks or even distinctive ones that have a long history in the marketplace but makes no logical sense for generic strings because, as the majority points out, it cannot apply to trademarks that have no history in the marketplace and are on the lower range of the scale:

A four-letter domain is a valuable property and can have many different purposes related to the letters “NVRT” which do not involve Complainant’s mark. Respondent purchased the domain in a batch of 41 four-letter domains. A respondent may have rights or legitimate interests in a disputed domain name where the respondent is a generic domain name reseller, depending of course on the facts of the individual case.

The dissent’s reasoning is equivalent to putting a thumb on the scale. It favors the trademark owner on the discredited theory that it has a better right to the domain name. And, by doing this, it undercuts the UDRP insistence that a complainant’s ultimate right to capture an accused domain name corresponding its trademark rests on proof that the registrant had complainant’s mark in mind. There is no proof of that in Randall E. Kay. The conclusion that a respondent acted in bad faith because “[it] was clearly targeting (i) someone who had a four letter trademark as a prospective purchaser . . . or (ii) someone with a legitimate reason to use te four letters NVRT” cannot possibly be a sufficient basis for drawing an inference of bad faith.

The dissent continued:

While Respondent may not have actually known of Complainant’s existence, Complainant was a member of the fairly small class Respondent was targeting as prospective purchasers for the domain name. I would find Respondent targeted Complainant.

The logical disconnect is that even though a complainant may be a “member of [a] fairly small class” it still has the burden of proving that it (that is, “it” in particular and not others!) is the target of respondent’s registration. If it were as the dissent argues then any owner of a newly minted trademark could capture a long owned domain name by claiming it was a member of a fairly small class.

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 here.

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