Not All Property Rights Are Created Equal

You've been there and know the terrain: The law breaks property into two categories — real and personal. If the object of a transaction is found to be personal property, then it is subsequently categorized as either tangible or intangible.

In the realm of interconnected networked computers, however, although broadly categorized as personal property, Internet property has characteristics of tangible and intangible property. Consequently, attorneys must take the special nature of Internet property into consideration when attempting to resolve or avoid legal difficulties relating to an Internet transaction, something, of course, to which e-commerce ventures find themselves at ongoing risk and dealing in round-the-clock daily.

To an e-commerce business, its Internet assets are as valuable as a bricks-and-mortar firm's inventory that moves from shelves in warehouses in bins and on forklifts.

Tangible, Intangible — A Bit of Both

Like intangible property, Internet property cannot be touched or otherwise perceived by a person's ordinary senses. This characteristic has resulted in a consensus in the legal community that Internet property should be protected in a manner similar to intellectual property. For example, trademark law has been applied to protect domain names — consider the Anticybersquatting Protection Act, in particular.

Like tangible property, though, Internet property is capable of being possessed without being acquired. When a person is in possession of Internet property, for instance, such as an e-mail, that item of Internet property will be protected against everyone except the true owner. Metatags — embedded tags that describe various aspects of a Web page — exemplify this attribute of Internet property. Internet property includes America Online “keywords,” instant-messaging screen names, telephony point codes, e-mail and domain names.

Unlike traditional intellectual property, however, most Internet property rights can be created by a non-governmental organization. For example, a company's AOL keyword Internet property is a contract right. But some Internet property rights arise from governmental authorization, such as the Federal Communications Commission's issuance of telephony point codes.

The government grants copyrights and patents to give authors and inventors incentives to create new products, processes and works of art for the public's benefit. Similarly, trademarks give companies incentive to foster good will and to prevent consumer confusion as to the source of goods. While copyright, trademark and patent rights may be associated with Internet property, they are not required to give rise to the existence of Internet property.

Internet property rights also differ from traditional intellectual property rights in that they are much easier to obtain. Unlike with a trademark or patent, no thorough examination process is required. There is no originality requirement as with a copyright. Generally, all that is required is knowledge of the registration procedures and the ability to pay the associated fees.

The initial manner of distributing Internet property, as exemplified by domain names, was on a first-come, first-served basis. Subsequently, as the value of Internet property developed, conventional laws have redistributed Internet property rights. For example, as Internet property gained recognition, Internet property began to obstruct trademark rights. Because Internet property — including keywords, metatags and domain names — often serve as symbols representing a particular product, sources of goods or people, or combinations of these, such conflict was expected.

Guidance From The Courts

In Playboy Enters. v. Netscape Communications, 55 F. Supp. 2d 1070 (C.D. Cal. 1999), Netscape used “playboy,” a trademark owned by Playboy Enterprises Inc., as an Internet search term. Playboy sought an injunction to end this advertising practice. The court denied the injunction, finding that Playboy failed to establish a likelihood of confusion. Subsequently, the court granted Netscape a summary judgment on those grounds.

The Ninth Circuit reversed, ruling that there was a question of material fact as to whether Netscape's advertising practice created a likelihood of “initial interest confusion.” Playboy Enters. v. Netscape Communications, 354 F.3d 1020 (9th Cir. 2004). Playboy argued that Internet users searched for the term “playboy” because it was associated with products of Playboy Enterprises, hence, those using the Internet search benefited from Playboy's goodwill.

The doctrine of initial interest confusion was established in Brookfield Communications v. West Coast Entertainment, 174 F.3d 1036 (9th Cir. 1999). In Brookfield, the Ninth Circuit found that the use of the plaintiff's trademark, “MovieBuff,” in the defendant's Web site metatags would guide consumers to the defendant's Web site even though they were seeking the plaintiff's products.

While some may argue that a notice disclaiming any relation to a trademarked entity would resolve this potential legal difficulty, others would argue that the metatags are unlawful under the Federal Trademark Dilution Act 15 U.S.C.A. 1125(c), because customer confusion is not required. A showing that the subsequent use of a famous mark causes dilution of the distinctive quality of the mark would suffice.

And Then There Are Domain Names

Consider the nature of the Internet property known as Internet domain names. They spring into existence as a consequence of a registration. They can be purchased and sold, but arguably not owned, because in the hypertechnical sense, they are not susceptible to private ownership (ie, Res nullius). The registrant's rights are treated like almost every other form of property, except that if the registrant had a subjectively unlawful purpose for acquiring it, then the registrant may be forced to transfer it.

Whether a domain name can or cannot be owned is not an issue with respect to Internet commerce, because the registration rights that arise and accrue to the registrant are tantamount to ownership rights. A domain-name registrant has a property right in the registration and can exercise property-like control over it. Such rights, however, are limited and may be eliminated by the owners of certain trademarks.

The nature of a transaction is significant when a party attempts to confiscate the object of a transaction. In particular, some Internet assets have special procedures associated with them. Again, consider domain names. Before 1999, the intangible nature of domain names made confiscation a difficult task, because such Internet property was not susceptible to ownership. But the process of seizing a domain name became significantly easier with the 1999 revision of the Uniform Domain-Name Dispute-Resolution Policy (UDRP).

All domain-name registrants must agree to be bound by UDRP. Thus, each registrant must submit to binding arbitration in cases where any one of the following facts is alleged:

• A complainant asserts that the domain name is identical or confusingly similar to a mark in which the complainant has rights;
• The registrant has no rights or legitimate interests in the domain name; and
• The domain name has been registered and is being used in bad faith.

A complainant brings an action by filling out a pre-existing application form, paying a predetermined fee, and mailing the application and fee to one of several authorized arbitration centers. The arbitrator can order the transfer of a domain to a successful complainant.

It should be noted that for the purpose of domain names, the aforementioned remedy is only possible because the U.S. government has been able to maintain a measure of control over the systems that are integral to the Internet. The registration of domain names is for all intents and purposes controlled by two entities, Network Solutions Inc. (NSI) and the Internet Corporation for Assigned Names and Numbers (ICANN). These groups received their monopolies over the domain-name registration scheme through a contract with the U.S. Department of Commerce.

With existing controls in place, and a network for resolving disputes, vigilance in protecting Internet assets is a process with teeth, and that works. Counsel and their e-commerce clients working together can conduct due diligence to keep the commercial venture's property — all of it — in the hands of those who own and should rightfully control it.

You've been there and know the terrain: The law breaks property into two categories — real and personal. If the object of a transaction is found to be personal property, then it is subsequently categorized as either tangible or intangible.

In the realm of interconnected networked computers, however, although broadly categorized as personal property, Internet property has characteristics of tangible and intangible property. Consequently, attorneys must take the special nature of Internet property into consideration when attempting to resolve or avoid legal difficulties relating to an Internet transaction, something, of course, to which e-commerce ventures find themselves at ongoing risk and dealing in round-the-clock daily.

To an e-commerce business, its Internet assets are as valuable as a bricks-and-mortar firm's inventory that moves from shelves in warehouses in bins and on forklifts.

Tangible, Intangible — A Bit of Both

Like intangible property, Internet property cannot be touched or otherwise perceived by a person's ordinary senses. This characteristic has resulted in a consensus in the legal community that Internet property should be protected in a manner similar to intellectual property. For example, trademark law has been applied to protect domain names — consider the Anticybersquatting Protection Act, in particular.

Like tangible property, though, Internet property is capable of being possessed without being acquired. When a person is in possession of Internet property, for instance, such as an e-mail, that item of Internet property will be protected against everyone except the true owner. Metatags — embedded tags that describe various aspects of a Web page — exemplify this attribute of Internet property. Internet property includes America Online “keywords,” instant-messaging screen names, telephony point codes, e-mail and domain names.

Unlike traditional intellectual property, however, most Internet property rights can be created by a non-governmental organization. For example, a company's AOL keyword Internet property is a contract right. But some Internet property rights arise from governmental authorization, such as the Federal Communications Commission's issuance of telephony point codes.

The government grants copyrights and patents to give authors and inventors incentives to create new products, processes and works of art for the public's benefit. Similarly, trademarks give companies incentive to foster good will and to prevent consumer confusion as to the source of goods. While copyright, trademark and patent rights may be associated with Internet property, they are not required to give rise to the existence of Internet property.

Internet property rights also differ from traditional intellectual property rights in that they are much easier to obtain. Unlike with a trademark or patent, no thorough examination process is required. There is no originality requirement as with a copyright. Generally, all that is required is knowledge of the registration procedures and the ability to pay the associated fees.

The initial manner of distributing Internet property, as exemplified by domain names, was on a first-come, first-served basis. Subsequently, as the value of Internet property developed, conventional laws have redistributed Internet property rights. For example, as Internet property gained recognition, Internet property began to obstruct trademark rights. Because Internet property — including keywords, metatags and domain names — often serve as symbols representing a particular product, sources of goods or people, or combinations of these, such conflict was expected.

Guidance From The Courts

In Playboy Enters. v. Netscape Communications , 55 F. Supp. 2d 1070 (C.D. Cal. 1999), Netscape used “playboy,” a trademark owned by Playboy Enterprises Inc., as an Internet search term. Playboy sought an injunction to end this advertising practice. The court denied the injunction, finding that Playboy failed to establish a likelihood of confusion. Subsequently, the court granted Netscape a summary judgment on those grounds.

The Ninth Circuit reversed, ruling that there was a question of material fact as to whether Netscape's advertising practice created a likelihood of “initial interest confusion.” Playboy Enters. v. Netscape Communications , 354 F.3d 1020 (9th Cir. 2004). Playboy argued that Internet users searched for the term “playboy” because it was associated with products of Playboy Enterprises, hence, those using the Internet search benefited from Playboy's goodwill.

The doctrine of initial interest confusion was established in Brookfield Communications v. West Coast Entertainment , 174 F.3d 1036 (9th Cir. 1999). In Brookfield, the Ninth Circuit found that the use of the plaintiff's trademark, “MovieBuff,” in the defendant's Web site metatags would guide consumers to the defendant's Web site even though they were seeking the plaintiff's products.

While some may argue that a notice disclaiming any relation to a trademarked entity would resolve this potential legal difficulty, others would argue that the metatags are unlawful under the Federal Trademark Dilution Act 15 U.S.C.A. 1125(c), because customer confusion is not required. A showing that the subsequent use of a famous mark causes dilution of the distinctive quality of the mark would suffice.

And Then There Are Domain Names

Consider the nature of the Internet property known as Internet domain names. They spring into existence as a consequence of a registration. They can be purchased and sold, but arguably not owned, because in the hypertechnical sense, they are not susceptible to private ownership (ie, Res nullius). The registrant's rights are treated like almost every other form of property, except that if the registrant had a subjectively unlawful purpose for acquiring it, then the registrant may be forced to transfer it.

Whether a domain name can or cannot be owned is not an issue with respect to Internet commerce, because the registration rights that arise and accrue to the registrant are tantamount to ownership rights. A domain-name registrant has a property right in the registration and can exercise property-like control over it. Such rights, however, are limited and may be eliminated by the owners of certain trademarks.

The nature of a transaction is significant when a party attempts to confiscate the object of a transaction. In particular, some Internet assets have special procedures associated with them. Again, consider domain names. Before 1999, the intangible nature of domain names made confiscation a difficult task, because such Internet property was not susceptible to ownership. But the process of seizing a domain name became significantly easier with the 1999 revision of the Uniform Domain-Name Dispute-Resolution Policy (UDRP).

All domain-name registrants must agree to be bound by UDRP. Thus, each registrant must submit to binding arbitration in cases where any one of the following facts is alleged:

• A complainant asserts that the domain name is identical or confusingly similar to a mark in which the complainant has rights;
• The registrant has no rights or legitimate interests in the domain name; and
• The domain name has been registered and is being used in bad faith.

A complainant brings an action by filling out a pre-existing application form, paying a predetermined fee, and mailing the application and fee to one of several authorized arbitration centers. The arbitrator can order the transfer of a domain to a successful complainant.

It should be noted that for the purpose of domain names, the aforementioned remedy is only possible because the U.S. government has been able to maintain a measure of control over the systems that are integral to the Internet. The registration of domain names is for all intents and purposes controlled by two entities, Network Solutions Inc. (NSI) and the Internet Corporation for Assigned Names and Numbers (ICANN). These groups received their monopolies over the domain-name registration scheme through a contract with the U.S. Department of Commerce.

With existing controls in place, and a network for resolving disputes, vigilance in protecting Internet assets is a process with teeth, and that works. Counsel and their e-commerce clients working together can conduct due diligence to keep the commercial venture's property — all of it — in the hands of those who own and should rightfully control it.