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Continuing Legitimate Interest in Domain Name After Termination of Business Relationship

A respondent’s right to continue using a trademark in its domain name after termination of its business relationship with the trademark holder is a contract issue, but under the right factual circumstances refusing to relinquish the domain name is actionable under UDRP. Ordinarily, permissive registration is conclusive against the complainant in a UDRP dispute because it disables the complainant from proving bad faith registration. Invariably in these situations the respondent’s post-termination business competes with the complainant’s, but whether a dispute of this kind is properly within the scope of the Policy depends on the existence or absence of language in the contract.

Where the contract is silent about post-termination rights the dispute is outside the scope of the Policy. In Re-Bath LLC v. Northern Nevada Bath, FA1002001305824 (Nat. Arb. Forum March 23, 2010) the parties failed to address the issue of post-termination rights in their contract. Hence, the question of rights becomes a trademark rather than an abusive registration issue. This is made clear by the Panel noting in obiter dicta the rule of law that applies under the UDRP, namely that since the disputed domain name was not registered in bad faith the complainant cannot satisfy its burden of proof. Obiter dicta, too, is offered on the issue of use: “[g]iven that the Respondent … is now using the contested domain name to point to a web site that provides factual information on the situation (namely that the Respondent is no longer a distributor for the Complainant), it would not appear that the present use of the contested domain name could be considered to be in bad faith in the sense of the Policy.”

In contrast, where the contract addresses post-termination rights in the domain name, the dispute is within the scope. Former franchisees have no legitimate interest in a disputed domain name even if they registered it with permission. ERA TM LLC and ERA Franchise Systems LLC v. Era Sierra Properties, FA0812001239255 (Nat. Arb. Forum February18, 2009) and RE/MAX International Inc. v. NCR Northcoast Realty, FA0906001266756 (Nat. Arb. Forum August 4, 2009). Forfeiting a domain name permissibly registered may appear in contradiction to the Policy, but the theory is sound. Although the respondent appeared to have registered the domain name in good faith – it represented and warranted as such in its registration agreement – its refusal to relinquish the domain name on termination demonstrates that it never really intended to do so, therefore it must have registered the domain name in bad faith. Since permission was conditional, default in relinquishing the domain name warrants such an inference. The look-back can be seen as a variant of that line of cases that holds that respondent can be charged with retroactive bad faith.

Levine Samuel, LLP <>
Gerald M. Levine <>

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