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Acquiescence Not a Defense to Cybersquatting, But Ground for Denying Transfer

The Panel in Iberostar Hoteles Y Apartamentos, S.L. v. N/A, Yuri Smolyansky, Registrant Organization: N/A Registrant / Contact Privacy Inc., D2011-0952 (WIPO August 23, 2011) points out that “[t]he Policy does not provide for a defense of acquiescence.” That is, equitable defenses – acquiescence and laches – are not identified in the subparagraphs of paragraph 4(b) and are rarely the basis for granting or denying transfer. However, sleeping on rights and apparent acquiescence in trademark use have consequences, frequently unfavorable to the complainant in a UDRP proceeding.  Iberostar is no exception.

It may appear contradictory that although the Panel expressly rejected Respondent’s acquiescence argument in Iberostar Hoteles he nevertheless denied transfer. Putting it bluntly: “a decision which could have the effect of closing down or severely affecting the Respondent’s business is better made by the judicial process.” If the domain name either is to be left with or taken away from respondent the proper course is an action under trademark law. The Panel in Disney Enters. Inc. v. Meyers, FA 697818 (Nat. Arb. Forum June 26, 2006) explained:

recognition of [equitable remedies] … requires the Panel to make a legal determination regarding the continuing validity of Complainant’s DISNEY mark. Such action is beyond the scope of the UDRP proceeding and if Respondent desires such an outcome it should avail itself of the proper judicial proceedings by which such a result might be accomplished.

Although the Panel in Iberostar Hoteles found that Respondent had no right or legitimate interest in the disputed domain name and even registered it in bad faith nevertheless the issues were beyond the scope of the Policy. It should be noted, however, that it is not always the case that unauthorized use of another’s trademark is illegitimate. Under the principles formulated in Oki Data Americas, Inc. v. ASD, Inc, D2001-0903 (WIPO November 6, 2001) a reseller or distributor can be legitimized if its use of the domain name clearly establishes a bona fide offering of goods or services, although as the Panel in Iberostar Hoteles also points out – although not citing to any decisions – “[a] small number of UDRP panels have taken the view that, without express authority of the relevant trademark holder, a right to resell or distribute that trademark holder’s products does not create a right to use a domain name that is identical, confusingly similar, or otherwise wholly incorporates the relevant trademark.”

Iberostar Hoteles did not deny “Respondent’s claim of his contacts [with] a complainant employee in the United States. Given the Respondent’s rewards and the fact that his involvement as an indirect agent must have been known, it is hard to infer current bad faith use.” So that even though the domain name registration and its initial use may have been in bad faith continuing use may have established an informal “agent”-like business connection. In other words, “the Complainant’s apparent partial acquiescence in the Respondent’s activities may have taken [the Respondent’s] current operations out of the bad faith use category for the purpose of the Policy. The fact that the Respondent’s activities apparently create a large amount of business for the Complainant is also a consideration.”

The difference between the decisions resting on the Oki Data principles and cases in which respondents are arguing a right or legitimate interest based on acquiescence is that in the former respondents prevail as a matter of domain name law, while in the latter (although it may appear that respondents prevail) in actual fact complainants lose because their conduct raises a triable issue of fact outside the scope of the Policy, that is whether the registration and use of the domain name infringes the holder’s trademark rights.

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