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Speculating in Domain Names: Pricing War(e)s

Speculation in one form of another has an ancient and honorable history. It not only creates entrepreneurial activity but fuels markets for selling wares and offering services, but also generates competition for consumers, and wars over loyalty. The commercialization of the Internet in the 1990s which extended market activity into virtual (cyber) space has many of the virtues of the actual but also its vices: cheating and fraud and other skullduggery.

Once it became clear that some domain name registrants were targeting trademarks for their reputational value and profiting from their registrations, it became equally clear that domain names could have value independent from trademarks. This happens because common words, descriptive phrases, acronyms, and random strings of letters dissociated from particular source contexts are capable of acquiring new and noninfringing associations. With trademarks, many terms are shared lawfully by owners distinguishing their goods or services. No one owns the word “apple” or can prevent others from adopting it as their market insignia, as long as the associational referent is to a different class of goods or services. Domain names have value precisely because they make no claim to any association with corresponding trademarks. Where one draws the line, of course, is not always clear; but whatever that line is, it is determined by the strength of the mark and registrant’s use of the corresponding domain name.

Courts quickly recognized this non-associational value of domain names. Thus, in Dorer v. Arel, 60 F. Supp. 2d 558, 561 (E.D. Va. 1999) the Court presciently noted that

Some domain names . . . are valuable assets as domain names irrespective of any goodwill which might be attached to them. And, of course, domain names can be freely transferred apart from their content. Indeed, there is a lucrative market for certain generic or clever domain names that do not violate a trademark or other right or interest, but are otherwise extremely valuable to Internet entrepreneurs.

What judges found true, so also, and quickly, did Panels; and this from the earliest decisions under the Uniform Domain Name Dispute Resolution Policy (UDRP). Panels quickly reached consensus that dictionary words, alone or combined to form common terms or phrases can be valuable assets where they are dissociated from source context. Investor valuation of domains depends on their discriminating choice of linguistic terms that may, and sometimes by happenstance, correspond to distinctive marks predating the registrations, but at the same time are noninfringing. There have been dissenting voices. For example, in The American Automobile Association, Inc. v. QTK Internet c/o James M. van Johns, FA1261364 (Forum July 25, 2009) the dissent opined that speculative registrations of generic words and/or letter combinations with the intention of selling them at a profit “[o]nce someone wants to acquire the domain name … were intended to be prohibited by the policy.”

Where “wars” (rather than “wares”) come in is with UDRP complaints of pricing: in which mark owners complain the domain name is too high, excessive and unreasonable, and in any event the domain name is not being used, and if not used what right does the registrant have? And should it not be forfeited, arguing in effect an equivalent of abandonment under trademark law if not used, say, for five years. But, there is no such “use it or lose it” law for domain names. Ordinarily (and for good reason) Panels do not wade into pricing (or should not, although sometimes they do) because it is not a factor on its own in determining bad faith.

The earliest UDRP decisions established the jurisprudence on noninfringing, nonassociational domain names. In Allocation Network GmbH v. Steve Gregory, D2000-0016 (WIPO March 24, 2000) (ALLOCATION and <allocation.com>) the Panel implicitly accepted acquiring domain names for resell was a legitimate business model. What is prohibited, of course, is speculating  in domain names with knowledge of another’s rights and targeting the reputational value of the mark:

The difficulty lies in the fact that the domain name allocation.com, although descriptive or generic in relation to certain services or goods, may be a valid trademark for others. This difficulty is [com]pounded by the fact that, while ‘Allocation’ may be considered a common word in English speaking countries, this may not be the case in other countries, such as Germany.

This view was bolstered by the Panel in Newstoday Printers and Publishers (P) Ltd. v. InetU, Inc., D2001-0085 (WIPO May 23, 2001) (>newstoday.com>. It held that

Even if that business, in the relevant context here, were to comprise the registration, for sale, of generic domain names either generally or to its customers, that would not be an illegitimate use of the domain name. This has been accepted in a number of prior panel decisions including those cited by Respondent.

The same notion of lawful acquisition and use of a name corresponding to a mark is also expressed in the same period of time in U.S. federal courts. For example, in Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1147 (9th Cir. 2002) the Court noted

Similarity of marks or lack thereof are context-specific concepts. In the Internet context, consumers are aware that domain names for different Web sites are quite often similar, because of the need for language economy, and that very small differences matter…. The descriptive nature and common, necessary uses of the word ‘entrepreneur’ require that courts exercise caution in extending the scope of protection to which the mark is entitled.

In Solon AG v. eXpensive Domains.com Project, D2008-0881 (WIPO August 1, 2008) (<solon.net>) the Panel noted that “Complainant evidently takes the view that domain name dealers are cybersquatters, because they acquire domain names without any intention of making any genuine active use of them and for no reason other than to sell them [ ] at a profit…. That is not the definition of a cybersquatter envisaged by the Policy” (emphasis added).

Where registrants acquire domain names composed of dictionary words or random letters without any evidence of trading on complainant’s reputation, even if identical or confusingly similar, they have a legitimate interest, and every right to sell them as they would any other asset. The point is underscored by the Panel in Barlow Lyde & Gilbert v. The Business Law Group, D2005-0493 (WIPO June 24, 2005) (<blg.com>). It held that “[s]tanding alone, there is nothing wrong with offering to sell a domain name at a high price. It is a very common business practice.”

This is also the Panel’s view in X6D Limited v. Telepathy, Inc., D2010-1519 (WIPO November 16, 2010). In X6D, the Complainant contends that the disputed domain name, <xpand.com> has been used in bad faith because respondent indicates on its website that it “is likely to ignore offers below USD 40,000 for a domain name.” But, the Panel also noted that “given the commercial value of descriptive or generic domain names it has become a business model to register and sell such domain names to the highest potential bidder.” So too in Bible Study Fellowship v. BSF.ORG / Vertical Axis Inc., D2010-1338 (WIPO November 29, 2010) in which the Respondent was offering <bsf.org> for sale through the website “www.domainbrokers.com” for the minimum price of USD 10,000.actice.”

In another 2010 case, Pantaloon Retail India Limited v. RareNames, WebReg, D2010-0587 (WIPO June 21), the Panel noted that “[w]hether [the consensus in holding that a respondent in the domain name business] is justified may be a matter for debate, but in the opinion of the Panel there is a strong body of precedent which, though not binding, is strongly persuasive.” The consensus view expressed in early and late cases which is endorsed in the WIPO Overview of Panel Views 3rd Ed.  is that “the mere pricing of the Domain Name at a very high level cannot in itself indicate bad faith at the time of registration.” Camper, S.L. v. Detlev Kasten, D2005-0056 (WIPO March 3, 2005. In fact, a “totally excessive and unreasonable demand” in response to an unsolicited offer (not an infrequent grievance) is not evidence of bad faith.

Reaching forward to the present, these conclusions have continuing confirmation. In Whispering Smith Limited v. Domain Administrator, Tfourh, LLC, D2016-1175 (WIPO September 27, 2016) (<bravesoul.com>) the Panel noted that “Respondent was engaged in legitimate speculation and the Complainant can only fault itself for not contacting the Respondent prior to adopting its brand.”  In other words, had Complainant done its due diligence before it adopted its brand it would have learned that <bravesoul.com> was taken. So too in Graftex Prodcom SRL and Graffitti – 94 R.B.I. Prodcom S.R.L. v. Piazza Affari srl, Michele Dinoia, D2017-0148 (WIPO March 22, 2017) (<bigotti.com>, holding that “the business of registering domain names including dictionary words to be, in itself, a legitimate commercial activity”).
The Panel in Armor v. Ozguc Bayraktar, Rs Danismanlik, D2019-1803 (WIPO September 17, 2019) (<kimya.com> [A generic Turkish word meaning “chemistry” in English] explained that “the business of monetizing domain names consisting of generic terms can be legitimate and … [this] obviously still applies if the requested sales price appears too high from the point of view of the prospective buyer, here the Complainant.” The same view is expressed in Karma International, LLC v. David Malaxos, FA1812001822198 (Forum February 15, 2019).

In words or substance, complainants are advancing the notion that speculating in domain names is wrong; it should not be that way; the law should grant the trademark owner possession of the domain name because it has a better right. This argument which has been expressed by some brand attorneys and non-attorneys in the brand industry is interesting but essentially bogus. Just as goods are commodified, so too are linguistic elements offered for sale on the Internet. While the same underlying concept applies to the Internet as to the actual market, namely protecting brands from infringing users and consumers from fraud, there are also differences between trademarks and domain names. The standards that apply to trademark infringement are different from determining bad faith intent to profit from registering a domain name identical or confusingly similar to a mark.

The Panel in Brooksburnett Investments Ltd. v. Domain Admin / Schmitt Sebastien, D2019-0455 (WIPO April 16, 2019) (<incanto.com> held that “[s]peculating in intrinsically valuable domain names represents a legitimate business interest in itself, unless the evidence points instead to a disguised intent to exploit another party’s trademark.”) This is particularly the case with dictionary words. Picture Organic Clothing v. Privacydotlink Customer 4032039 / James Booth, Booth.com, Ltd.,  D2020-2016 (WIPO October 5, 2020) (PICTURE and <picture.com>: “This failure of evidentiary support is telling given that the word ‘picture’ is a common term and there is evidence that ‘picture’ is likely used by many other parties for a wide variety of good and services.”)

Other cases include Sahil Gupta v. Michal Lichtman / Domain Admin, Mrs Jello, LLC, D2020-1786 (WIPO September 15, 2020) (<spase.com>, seeking to deprive respondent of its lawful registration: “The Complainant contends that the Respondent has acquired a well-known and longstanding reputation of ‘domain squatting’ for the sole purpose of hoarding domains names to extort the trademarks of business owners.” This is a bit of a stretch: “hoarding” is not unlawful, and the Panel dismissed the complaint with an RDNH sanction. Also a Plan B is Cooper’s Hawk Intermediate Holding, LLC v. Tech Admin / Virtual Point Inc. FA2010001916204 (Forum November 17, 2020). Finding RDNH, the Panel noted:

The fact that the Respondent offered to sell the domain name for an excessive fee years after the domain name was acquired does not in and of itself mean that the domain name was registered in bad faith, especially when it was the Complainant that initiated the contact for purchase of the domain.

This brief overview draws attention to linguistic terms found to be lawful. They are quite common in one language or another. The decusions illustrate two important points: 1) weak marks cannot without more establish bad faith registration; and 2) complainants will be admonished with RDNH if their complaints should never have been launched.

A final point is that these alleged infringing but non-associational terms make up a very small fraction of cybersquatting cases, and are a fraction of a fraction of cases overall. Thus, although these comments highlight a certain class of linguistic term, they should not be taken as a magic key for defending rights. Nevertheless, at the same time, the jurisprudence is clear that pricing domain names is not a litigable issue. It is for the parties to come to agreement; and if they cannot there is no cause of action to compel a domain name registrant to be more reasonable.

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