Fighting Internet Pirates: Remedies Available for Domain Name Disputes

Generally, the least expensive and the quickest route to resolving a cybersquatting dispute is under the UDRP. The UDRP is an administrative proceeding conducted by a panel of one to three members who have the authority to resolve domain name disputes. The ACPA, on the other hand, is an actual federal civil action similar to typical trademark infringement actions, but which provides specific remedies not otherwise available under traditional trademark infringement claims.

UDRP Proceedings

To initiate a UDRP proceeding, the trademark owner (the “complainant”) files a complaint along with the appropriate fee with an accredited dispute-resolution service provider. After the provider serves the alleged cybersquatter (the “respondent”) with the complaint, the respondent has 20 days to submit a response. Upon expiration of the 20-day response time, regardless of whether the respondent actually filed a response to the complaint, the provider will appoint a panel to render a decision. The panel will consist of one member unless the complainant or respondent requests a three-member panel. After the panel's appointment, it generally has 14 days to render its decision. The panel's decision is usually based solely on the written complaint and the response and any supporting documentation that was submitted. Oral hearings are rarely granted.

The panel will forward its written decision to the provider, to the parties, and to the registrar of the disputed domain name. After a mandatory 10-day waiting period, the registrar will implement the panel's decision unless the provider is notified in writing that one of the parties has filed a civil action, which will have the effect of staying the implementation of the panel's decision. If the panel's decision is in favor of the complainant, the registrar will either be instructed to cancel the domain name or transfer it to the complainant if so requested. If the panel's decision is in favor of the respondent, the panel's decision will instruct the domain name registrar to take no action with respect to the domain name.

Although damages are not recoverable under the UDRP, because of the relatively quick resolution (typically less than 60 days) and nominal fees (typically less than $1,500 per domain name for a single-member panel), a UDRP action is an appealing option, particularly when considering that, according to one study, the respondent defaults by failing to file a response to the complaint in more than 54% of all UDRP proceedings initiated. See, Prof. Michael Geist, Fair.com?: An Examination of the Allegations of Systematic Unfairness in the ICANN UDRP, (August, 2001); Prof. Michael Geist, Fundamentally Fair.com? An Update on Bias Allegations and the ICANN UDRP. Both articles can be found at www.udrpinfo.com. Although a default by the respondent does not automatically result in a panel decision in favor of the complainant, the odds of prevailing are decidedly in favor of the complainant when the panel only receives the complainant's allegations.

Additionally, in the above referenced articles by Professor Geist, it is suggested that certain providers are more disposed to rule in favor of the trademark owner than for the alleged cybersquatter. Professor Geist's study of single-member UDRP panel decisions found that providers with the National Arbitration Forum (NAF) and the World Intellectual Property Organization (WIPO) rule in favor of the trademark owner approximately 80% of the time, and that providers with the CAF Institute for Dispute Resolution (CAF) ruled in favor of the complainant only 60% of the time. Thus, when considering a UDRP proceeding, the results of Professor Geist's study strongly suggest that it may be in the trademark owner's interest to elect a single-member panel and file the UDRP complaint with a NAF or WIPO provider.

ACPA Proceedings

The ACPA became law on November 29, 1999 and creates civil liability for acts of cybersquatting. Unlike traditional trademark infringement litigation, liability will be imposed under the ACPA regardless of whether the parties' goods or services are related. Rather, only the domain name is compared to the plaintiff's trademark.

The burden for establishing liability against the alleged cybersquatter under the ACPA is very similar to that under the UDRP. To prevail on a claim under the ACPA, the plaintiff must prove: 1) the defendant registered, trafficked in, or used a domain name; 2) the domain name is identical or confusingly similar to the plaintiff's trademark; 3) the plaintiff's trademark was distinctive at the time of the defendant's registration, trafficking in, or use of the domain name; and 4) the defendant registered the domain name in bad faith with the intent to profit from the use of the plaintiff's mark.

One important distinction in the elements of proof between UDRP and ACPA proceedings is that under the UDRP, the trademark owner must also prove bad faith use of the domain name, while under the ACPA the plaintiff/trademark owner need only prove bad faith registration.

Another distinction is that under the ACPA, a successful plaintiff, in addition to obtaining an order instructing the domain name registrar to cancel or transfer the domain name, may recover its costs plus the defendant's profits and any business damages and losses actually sustained by the plaintiff. A successful plaintiff may also be entitled to enhanced damages and attorney's fees, depending on the egregiousness of the cybersquatter's conduct. Alternatively, instead of recovering profits and damages, the ACPA allows the plaintiff to elect to recover statutory damages in an amount not less than $1,000 and not more than $100,000 per domain name, as the court considers just.

Conclusion

The means for committing piracy have changed from the 17th century, but the impact of piracy remains the same. The UDRP and ACPA offer certain advantages and present certain disadvantages in fighting cyberpirates. However, both procedures provide alternative viable options to franchisors seeking to redress acts of cybersquatting, apart from those available through traditional trademark infringement litigation.

As franchisors begin to rely more heavily on the Internet for conducting business, whether for advertising purposes, for providing online services to customers and franchisees, or for engaging in e-commerce, more franchisors will inevitably become victims of the modern-day type of piracy known as cyberpiracy or cybersquatting – the act of registering a domain name that is identical or confusingly similar to the trademark of another for commercial gain.

Cybersquatting can take on a number of different forms, all of which have dire consequences for franchisors and franchisees. For example, a cybersquatter may monitor a franchisor's domain name for the purpose of snatching it up the very moment the franchisor mistakenly allows the domain name to expire, with the intent to blackmail the franchisor into paying the cybersquatter several thousand dollars in order to transfer the domain name back into the franchisor's name. Alternatively, a cybersquatter may register a domain name that is a common misspelling of, or is otherwise confusingly similar to, a franchisor's trademark or trade name with the intent of attracting and misdirecting unsuspecting Internet users to the cybersquatter's competing Web site.

Thus, franchisors having an Internet presence should be aware of the alternatives available when finding themselves having to deal with a cybersquatter. Originally, the franchisor's only legal recourse was traditional trademark infringement litigation. But this is not particularly well suited for domain name disputes and can be a very costly and lengthy process, often taking a year or more to litigate. Today, there are two other procedures that have been specifically implemented to redress cybersquatting, namely, the Uniform Domain Name Dispute Resolution Policy (UDRP), developed by the Internet Corporation for Assigned Names and Numbers (ICANN), and the Anticybersquatting Consumer Protection Act (ACPA).

Generally, the least expensive and the quickest route to resolving a cybersquatting dispute is under the UDRP. The UDRP is an administrative proceeding conducted by a panel of one to three members who have the authority to resolve domain name disputes. The ACPA, on the other hand, is an actual federal civil action similar to typical trademark infringement actions, but which provides specific remedies not otherwise available under traditional trademark infringement claims.

UDRP Proceedings

To initiate a UDRP proceeding, the trademark owner (the “complainant”) files a complaint along with the appropriate fee with an accredited dispute-resolution service provider. After the provider serves the alleged cybersquatter (the “respondent”) with the complaint, the respondent has 20 days to submit a response. Upon expiration of the 20-day response time, regardless of whether the respondent actually filed a response to the complaint, the provider will appoint a panel to render a decision. The panel will consist of one member unless the complainant or respondent requests a three-member panel. After the panel's appointment, it generally has 14 days to render its decision. The panel's decision is usually based solely on the written complaint and the response and any supporting documentation that was submitted. Oral hearings are rarely granted.

The panel will forward its written decision to the provider, to the parties, and to the registrar of the disputed domain name. After a mandatory 10-day waiting period, the registrar will implement the panel's decision unless the provider is notified in writing that one of the parties has filed a civil action, which will have the effect of staying the implementation of the panel's decision. If the panel's decision is in favor of the complainant, the registrar will either be instructed to cancel the domain name or transfer it to the complainant if so requested. If the panel's decision is in favor of the respondent, the panel's decision will instruct the domain name registrar to take no action with respect to the domain name.

Although damages are not recoverable under the UDRP, because of the relatively quick resolution (typically less than 60 days) and nominal fees (typically less than $1,500 per domain name for a single-member panel), a UDRP action is an appealing option, particularly when considering that, according to one study, the respondent defaults by failing to file a response to the complaint in more than 54% of all UDRP proceedings initiated. See, Prof. Michael Geist, Fair.com?: An Examination of the Allegations of Systematic Unfairness in the ICANN UDRP, (August, 2001); Prof. Michael Geist, Fundamentally Fair.com? An Update on Bias Allegations and the ICANN UDRP. Both articles can be found at www.udrpinfo.com. Although a default by the respondent does not automatically result in a panel decision in favor of the complainant, the odds of prevailing are decidedly in favor of the complainant when the panel only receives the complainant's allegations.

Additionally, in the above referenced articles by Professor Geist, it is suggested that certain providers are more disposed to rule in favor of the trademark owner than for the alleged cybersquatter. Professor Geist's study of single-member UDRP panel decisions found that providers with the National Arbitration Forum (NAF) and the World Intellectual Property Organization (WIPO) rule in favor of the trademark owner approximately 80% of the time, and that providers with the CAF Institute for Dispute Resolution (CAF) ruled in favor of the complainant only 60% of the time. Thus, when considering a UDRP proceeding, the results of Professor Geist's study strongly suggest that it may be in the trademark owner's interest to elect a single-member panel and file the UDRP complaint with a NAF or WIPO provider.

ACPA Proceedings

The ACPA became law on November 29, 1999 and creates civil liability for acts of cybersquatting. Unlike traditional trademark infringement litigation, liability will be imposed under the ACPA regardless of whether the parties' goods or services are related. Rather, only the domain name is compared to the plaintiff's trademark.

The burden for establishing liability against the alleged cybersquatter under the ACPA is very similar to that under the UDRP. To prevail on a claim under the ACPA, the plaintiff must prove: 1) the defendant registered, trafficked in, or used a domain name; 2) the domain name is identical or confusingly similar to the plaintiff's trademark; 3) the plaintiff's trademark was distinctive at the time of the defendant's registration, trafficking in, or use of the domain name; and 4) the defendant registered the domain name in bad faith with the intent to profit from the use of the plaintiff's mark.

One important distinction in the elements of proof between UDRP and ACPA proceedings is that under the UDRP, the trademark owner must also prove bad faith use of the domain name, while under the ACPA the plaintiff/trademark owner need only prove bad faith registration.

Another distinction is that under the ACPA, a successful plaintiff, in addition to obtaining an order instructing the domain name registrar to cancel or transfer the domain name, may recover its costs plus the defendant's profits and any business damages and losses actually sustained by the plaintiff. A successful plaintiff may also be entitled to enhanced damages and attorney's fees, depending on the egregiousness of the cybersquatter's conduct. Alternatively, instead of recovering profits and damages, the ACPA allows the plaintiff to elect to recover statutory damages in an amount not less than $1,000 and not more than $100,000 per domain name, as the court considers just.

Conclusion

The means for committing piracy have changed from the 17th century, but the impact of piracy remains the same. The UDRP and ACPA offer certain advantages and present certain disadvantages in fighting cyberpirates. However, both procedures provide alternative viable options to franchisors seeking to redress acts of cybersquatting, apart from those available through traditional trademark infringement litigation.