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Sanctionable Conduct for Abusing the UDRP Process

March 14, 2017

To claim a superior right to a string of characters mark owners must (first) have priority (unregistered or registered) in using the mark in commerce; and secondly, have a mark strong enough to rebut any counter argument of registrant’s right or legitimate interest in the string. A steady (albeit small) number of owners continue to believe it’s outrageous for registrants to hold domain names earlier registered than their trademarks and be permitted to extort amounts far “in excess of [their] documented out-of-pocket costs directly related to the domain name.” However, the only absolute when it comes to names is that ownership belongs to the first to acquire (for domain names) and use in commerce (for trademarks).

To have an actionable claim under U.S. trademark law, a mark has to be “distinctive at the time of the registration of the domain name.” Anticybersquatting Consumer Protection Act (ACPA), Sec.1125(d)(1)(ii)(I). The ACPA states the proposition directly: no priority, no standing. The Uniform Domain Name Dispute Resolution Policy (UDRP) reaches the same result indirectly by requiring complainants to prove holders registered the domain names in bad faith, which (leaving out an exception to this rule) they cannot possibly do if a particular mark is not”distinctive at the time of the registration of the domain name.”

While there is no monetary penalty for initiating a UDRP proceeding (as there is under federal law) Panels are empowered to issue sanctions for reverse domain name hijacking but this empowerment is discretionary. As a result, the parameters of sanctionable conduct largely depend on the panelist appointed to hear the matter. Conduct that one panelist believes sanctionable to another (for reasons not always clear) is excusable.

For Panels at one end of the spectrum, a complainant’s failure to respond to a sanction request can be fatal because it supports a negative inference that there is no defense.  I’ll return to this in a moment. At the other end of the spectrum, a Panel in a recent case declined to find reverse domain name hijacking because Complainant “at least [presented] a colorable argument” (albeit relying on a principle of bad faith that has essentially been rejected by other panelists). The Panel found this reliance (that renewal of registration with knowledge of a mark is bad faith)  “was reasonable.” Dividex Management, LLC v. Rory Blake, D2016-2574 (WIPO February 17, 2017) (). Some commentators would find that relying on a rejected proposition of bad faith is “not reasonable” at all, in fact dubious and particularly so where the mark was “not distinctive” and postdated the registration of the domain name by more than a decade, since in that factual context there could not have been bad faith registration.

Responding to the Panel’s decision in Clasen Quality Chocolate, Inc. v. Earthlink, Inc., D2017-0129 (WIPO March 1, 2017) (<cqc.com>) Andrew Allemann (of Domain Name Wire) exclaimed: “Wow: WIPO panelist lets ‘misconceived’ complainant off the hook.”  The conduct found excusable in Clasen Quality that elicited Mr. Allemann’s intake of breath was the Panel’s explanation that this “Complaint appears, on balance, to be more misconceived than malicious in nature” (emphasis added). The head scratcher here is that the Panel also stated that the “Complaint should not have been brought” which is the formulaic language used by panelists on the other end of the spectrum for expressing abuse of the proceeding.

RDNH rests on two factual certainties.  First, complainant knew or should have known that the complaint could not have succeeded; and second, essentially the first intensified  by adding a new element, is the so-called Plan B stratagem.  Plan B is triggered by complainants using surrogates to elicit offers from registrants and then using the offers as evidence of bad faith under paragraph 4(b)(i) of the Policy. But, again, what to one Panel is a Plan B is not to another.

The minority Panel in Gabs S.r.l. v. DOMAIN ADMINISTRATOR – NAME ADMINISTRATION INC. (BVI), CAC 101331 (ADReu February 26, 2017) (<gabs.com>) takes the view that RDNH is warranted where the complainant should have known that its complainant lacked merit and that this was a “classic Plan B case”:

First, the Complainant’s case was particularly weak; it lost on two of the major issues and almost lost a third. More importantly, the Complainant must have known the case would fail before it filed the Complaint. That should have been apparent after a moment’s reflection that it was impossible to prove the Disputed domain name was registered in bad faith when it was registered before the relevant trademark. Likewise, it must have been appreciated that it would be impossible to prove that the Respondent had no rights or legitimate interests in the Disputed domain name.

The majority disagreed: “Complainant [did not act] in bad faith when it initiated the proceeding relying on its asserted prior rights (unregistered trademark and company name) and senior registered trademarks (the GABS trademark) in various countries (amongst which some English-speaking countries), which consist of a generic term in the English language.”

The minority Panel’s assertion that complainant “must have known” or “must have appreciated” is shorthand for lack of evidence. What supports “must have”?  In fact, the consensus is against speculation and subjectivity. WIPO reports in its Overview at paragraph 4.17 that “panels have found Reverse Domain Name Hijacking in circumstances including where: the complainant in fact knew or clearly should have known at the time that it filed the complaint that it could not prove one of the essential elements required by the UDRP” (emphasis added). The intensive qualifier “clearly” calls for an objective assessment which is missing from the “must” phrases.

In Clasen Quality the alignment of factual circumstances favored Respondent. In Gabs the evidence for abuse of process fell short of proving that “complainant in fact … clearly should have known.” It was plausible for Complainant to have believed the domain name was registered because of the notoriety of international presence that predated the domain name. Gabs is more of a judgment call, but on balance the majority’s reasoning is more persuasive. After all, it is understandable (assuming the right alignment of factual circumstances) for complainants to test the law where it has a market history of unregistered rights.

In contrast, there are the Plan B cases; but what are they? First of all it is an elevated act based on complainant’s failure to achieve its Plan A goal. The Panel in Patricks Universal Export Pty Ltd. v. David Greenblatt, D2016-0653 ((WIPO June 21, 2016) (<Patricks.com>) offers three “well-established reasons for imposing a finding of abuse”:

(a) Complainant’s only real gripe is the price Respondent demanded for the Domain Name, making this a classic “Plan B” ….

(b) Complainant disregards settled Policy precedent on a number of matters, most notably … regarding registration of a disputed domain name long before the complainant obtained any trademark rights….  [and]

(c) Complainant is represented by counsel. Professional representatives of parties in UDRP proceedings are expected to be aware of or at least familiarize themselves with the Policy and Policy precedent, and to abide by the Policy and Rules.

Sanctionable conduct includes at least two of these three acts. If there’s insufficient proof of intention to “harass” respondent or unclear motivation of bad faith in initiating the UDRP proceeding (Rules 15(c)) the complaint should be dismissed without sanction.  A respondent’s burden (or a panelist’s assessment if unasked it elects to review the evidence discussed below) is not met without clear proof of abusive conduct.

But, oddly, this could come in the unusual form of complainant failing to rebut the request, Georg Mez AG v. Mez Kalra, D2016-1932 (WIPO January 6, 2017) (<mez.com>). In Mez Respondent requested RDNH but Complainant “expressly declined to respond.” This elicited from the Panel (the minority Panel in Gabs) the following comment: “In the context of this proceeding, statements in relation to RDNH were certainly required and it is not unreasonable to expect that they would have been provided.” Moreover, “[w]hen a panel finds that a party will not engage in debate on a particular issue, it is entitled to conclude that the party’s case on the issue in question has some inherent deficiencies.” The Panel went on to hold that this was a Plan B case because the complaint followed an unsuccessful attempt to purchase the domain name.

There is a further split among Panels about sanctions if not requested.  Some panelists take the position that requested or not (or even a default) they have the obligation to make a finding. The defaulting Respondent in Cyberbit Ltd. v. Mr. Kieran Ambrose, Cyberbit A/S, D2016-0126 (WIPO February 26, 2016) purchased <cyberbit.com> more than a decade years earlier than the existence of Complainant’s mark. The Panel notes that “the deficiencies [of proof] must have been obvious to anyone remotely familiar with the Policy.” It continued:

If the Complainant did not launch the Complaint (and pursue the matter by way of the amended Complaint) knowing that it was doomed to failure, a matter upon which the Panel comes to no concluded view, it was nonetheless, in the Panel’s view, at the very least culpably reckless as to the Complaint’s prospects of success and thus guilty of an abuse of this administrative proceeding.

Earlier authority for panelists’ sua sponte finding RDNH includes Goway Travel Limited v. Tourism Australia, D2006-0344 (WIPO June 6, 2006) (“The Rules specifically put the burden on the Panel to determine whether a complainant has tried to use ‘the Policy in bad faith to attempt to deprive a registered domain name holder of a domain name.’”)

In contrast, other panelists will not consider sanctioning complainant even if the record is clarion. Well-Link Industry Co. Ltd. v. Jeff Park, Nexpert, Inc., D2017-0036 (WIPO March 1, 2017) (Respondent defaulted; no sua sponte consideration of RDNH despite Complainant’s absurd argument it had a “justiciable claim”); Greenvelope, LLC v. Virtual Services Corporation, D2017-0006 (WIPO February 25, 2017) (<greenenvelope.com>):

 In this case, even in the absence of a response from Respondent, there is simply no evidence provided by Complainant that Respondent registered the Domain Name to intentionally target a trademark owner including Complainant and its GREENVELOPE mark, or the trademark of any third-party for that matter. Instead, the Domain Name corresponds to the dictionary words “green” and “envelope,” and was registered years before Complainant first started using its trademark

No request and no finding of RDNH.

There was both request and finding in Central Media S.C. v. Valentin Lotrean,.D2016-2598 (WIPO February 20, 2017) (<centralmedia.com>)

the Panel considers that the Complainant has been guilty of RDNH because its case has failed by a large margin. In the Panel’s opinion, the Complainant knew or at least should have known that it could not prove one of the essential UDRP elements. The Complainant’s representatives quoted extensively from UDRP case law and the Panel thinks it unlikely that they were unaware of the current overwhelming view of UDRP panelists as to the need to prove registration as well as use in bad faith.

In this case, RDNH is supported by all three bad faith acts. The reasoning is sharp and clear; very different from the reasoning of the excusers who appear to elevate the evidentiary requirement to a higher than preponderance standard.

The missing piece of complainants’ claims in these cases is priority. Although they have standing under the UDRP, which they would not have had under the ACPA, they have no actionable claim. It is neither improper nor unlawful to register domain names today that tomorrow may by happenstance correspond to newly minted trademarks. Speculating today that a particular string of characters may be valuable tomorrow does not support an actionable claim for cybersquatting.(Incidentally, there is little law on damages in U.S. federal court against overreaching mark owners sued after successful claims under the UDRP, although a couple of pending cases hold promise; but there have been several cases of cybersquatting damages against domain name holders).

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 will be available in e-book format on October 1, 2016; the print format will be published on December 1, 2016. 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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