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The Suitable Defendant Rule: In Rem Jurisdiction under the ACPA

The Anticybersquatting Consumer Protection Act (ACPA) creates two distinct avenues by which mark owners may seek a remedy for cybersquatting. A person who is a suitable defendant under 15 U.S.C. §1125(d)(1)(A) is one over whom the court has in personam jurisdiction. However, if the mark owner is “not able to obtain in personam jurisdiction over a person who would have been a defendant” in the ACPA action, then “[t]he [mark] owner may file an in rem civil action against a domain name in the judicial district in which the domain name registrar [ ] [or] domain name registry . . . is located. §1125(d)(2)(A). An in rem civil action is against the domain name. The issue is whether an “unsuitable defendant” can oust a pending in rem civil for an in personam litigation and under what circumstances. What kind of gamesmanship is going on?

In a very recent decision, Prudential Ins. Co. of America v. Pru.com, 20-cv-00450 (E.D. Va, Alexandria Division, July 22, 2020) the Court was presented with a first impression issue: the domain name holder who was not otherwise a “suitable defendant” under Section 1 of the ACPA  appeared after the commencement of the in rem civil action and moved to dismiss the complaint on the theory that it consented in the registrar agreement to in personam jurisdiction in Arizona, the seat of the registrar. The unsuitable defendant’s theory rests on what under the Uniform Domain Name Dispute Resolution Policy is called “mutual jurisdiction.” This, of course, presupposes a UDRP award transferring the domain name to the mark owner, which never happened because although a UDRP complaint was commenced it was withdrawn in favor of the in rem civil action. The withdrawal was probably strategic which I’ll comment on in closing this piece.

The issue before the Court is whether an otherwise unsuitable defendant can affect the course of the litigation. The Court rejected the foreign registrant’s argument in the following strong language:

To [accept foreign registrant’s argument] would incentivize foreign registrant defendants to engage in gamesmanship and forum shopping by consenting to jurisdiction in a forum of their choice at a time of their choosing after litigation has commenced against them. Such gamesmanship would only serve to incur additional litigation costs on trademark owners. The ACPA does not permit such an absurd result. (Emphasis added)

By what route of reasoning did the court reach the conclusion that “[t]he ACPA does not permit such an absurd result?

The Court first of all refers to an earlier case decided by the 4th Circuit in 2002, Porsche Cars N. Am., Inc. v. Porsche.net, 302 F.3d 248 (4th Cir. 2002). In that case, the foreign registrant of several domain names decided to submit to personal jurisdiction in the district court for the Southern District of New York “three days prior to the scheduled trail date for the in rem action against the domain names in the District Court for the Eastern District of Virginia.” The Court rejected the argument by the foreign registrant in Porsche but the Prudential Court concluded that the Fourth Circuit “did not decide when personal jurisdiction over a registrant must exist in order to preclude in rem jurisdiction over the domain name under Option 1” (emphasis on “when” is in the decision).

So the issue is when is a party precluded from affecting the course of the litigation?  The answer rests on the court’s formulation of a “suitable defendant” rule. Since the foreign registrant was not a suitable defendant when the mark owner commenced the in rem civil action, it could not make itself suitable by consenting to in personam jurisdiction. Where “a trademark owner has exercised due diligence and determined that any would-be defendant is a foreign person that is not subject to the personal jurisdiction in the United States . . . ‘the jurisdiction of the court depends upon the state of things at the time of the action brought, and that after vesting, it cannot be ousted by subsequent events,’” citing a case from 1824 (yes, 1824!), Mollan v. Torrance, 9 Wheat. 537, 539).

We will hear more about this case because although unsuitable as an in personam defendant the domain name holder can still defend itself on the theory that it registered <pru.com> lawfully. The Court filed an Order on September 11, 2020 that denied plaintiff’s motion for default judgment (it set aside the default of record) and granted defendant’s motion for leave to file an answer out of time.

While it may be curious as to why the domain name registrant wanted to appear personally and be subject to in personam jurisdiction, the fact is that this case presents an important issue for domain name investors. What possible right could Prudential have to <pru.com>?  Well, it has a bunch of “pru+” trademarks and is alleging rights to “pru” alone (family of marks argument), which, of course, is the reason to follow closely the next act in this case. The basic fact is that Prudential surreptitiously sought to acquire the domain name after learning it was being offered for sale, but when it learned the demand price was in the six figures, it withdrew the UDRP complaint after the domain registrant responded with a defense of lawful registration.

One can easily draw the inference that Prudential withdrew the UDRP complaint because the Respondent offered a sufficient rebuttal that jeopardized prevailing in that forum. Let’s see how that “rebuttal” when it comes tallies up in federal court! The E.D. Virginia, Alexandria Division, though, has not been kind to investors whose domain names are identical or confusingly similar to trademarks, most recently Code-To-Learn Foundation D/B/A Scratch Foundation v. scratch.org, 1:19-cv-0006 (2019) even though the domain name was registered before the existence of the mark.

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