Re-registration of Current Domain Name By New Owner Not ACPA 'Registration'

In 2004, Erik Bethke founded GoPets Ltd. in South Korea. The company created a GoPets website that allowed virtual pets to move between the computers of registered users. GoPets Ltd. applied for a U.S. registration for the service mark GOPETS on Sept. 30, 2004, alleging a first use date in U.S. commerce of Aug. 20, 2004. The registration issued Nov. 7, 2006.

Bethke began attempts to acquire the gopets.com domain name from Edward Hise in 2004. On Sept. 1, 2004, Edward responded to Bethke's initial e-mail inquiry with information about an auction for the domain name he was planning to hold on Sept. 15, 2004. Bethke did not bid in the auction. Instead, on Oct. 11, 2004, he wrote again to Edward offering to pay $750 for the domain name. In January 2005, Bethke had a friend write to Edward inquiring about the name. Edward responded that he would not sell the domain name “for little or nothing” and that he had a potential partnering group that wanted to develop the site for a share of the profits. In May 2005, Bethke wrote to Joseph Hise, offering $100 and threatening an ICANN (Internet Corporation for Assigned Names and Numbers) arbitration proceeding if the offer was refused. A year later, Bethke filed that proceeding with the World Intellectual Property Organization (WIPO).

WIPO Decision

The WIPO arbitrator found that the gopets.com domain name was confusingly similar to the GOPETS service mark and was unconvinced that the Hise brothers ever had serious plans to develop a website at gopets.com. He nevertheless concluded that the domain name was not originally registered in bad faith because it was registered five years before GoPets Ltd. was founded. Soon after the decision issued, Edward Hise began purchasing a number of domain names, including gopet.org, gopet.biz, gopets.com, egopets.com, gopet.bz, gopets.bz, gopet.ws, gopets.ws, gopet.tv, gopet.de, gopet.eu and gopet.name. A few months later he registered mygopets.com and igopets.com (Additional Domains).

On Oct. 30, 2006, after the WIPO decision but prior to issuance of the GOPETS registration, Bethke again offered to purchase the domain name, this time for $5,000. Two weeks later he increased his offer to $40,000. He notified the Hises that his company had registered the domain name gopetslive.com, was about to start a marketing campaign and that, after Dec. 11, 2006, he would lose “all real urgency” to buy the gopets.com name. On Dec. 12, 2006, the Hise brothers sent Bethke an e-mail with a four-page letter attached, intended for Bethke's investors. The letter warned Bethke's investors that use of gopetslive.com would confuse GoPets' game users and that purchase of gopets.com would dramatically improve its search engine results. They also threatened to insert metatags into the code of gopets.com so that game users would be directed to gopets.com instead of gopetslive.com. They offered to sell the name for $5 million. Two days after sending the letter, Edward transferred the gopets.com registration to Digital Overture, the brothers' corporation.

While those exchanges were taking place, the Hises added content to the gopets.com website, eventually posting a link to the WIPO decision. On March 16, 2007, they posted text saying: “Welcome to goPets.com the official online website.”

District Court Decision

In March 2007, GoPets Ltd. filed a complaint against the Hises and Digital Overture in the U.S. District Court for the Central District of California, alleging cybersquatting under the ACPA, service mark infringement and unfair competition under the Lanham Act and California law and false advertising under California law. When GoPets Ltd. learned about the Additional Domains during discovery in the case, it amended the complaint to add similar claims concerning them. GoPets asked for an injunction, transfer of all of the domain names, statutory damages, wrongful profits, actual damages, and attorneys' fees. In May 2008, the District Court granted GoPets' motion for summary judgment on the federal ACPA and Lanham Act claims, ordered transfer of all the domain names to GoPets, awarded $100,000 in statutory damages for gopets.com and $1,000 in statutory damages for each of the remaining domain names, and awarded GoPets attorneys' fees. GoPets dropped its state law claims.

Appeals Court Decision

On appeal, the Ninth Circuit construed the term “registration” in the ACPA to mean only the initial purchase of the domain name from the original registrar. It rejected the District Court's interpretation that “registration” could also include later transfer of a domain name to another owner. The Ninth Circuit rejected a contrary opinion by the Third Circuit that the word “registration” includes a new registration contract with a new registrar and a new owner. Schmidheiny v. Weber, 319 F.3d 581 (3d Cir. 2003). The Ninth Circuit analogized the domain name transfer to transfers under traditional property law, concluding that because Edward Hise could have retained his rights to gopets.com indefinitely if he had not transferred the domain name to his corporation, there was no basis in the ACPA to determine that his right was lost when the name was transferred to a new owner. Therefore, Digital Overture's re-registration of the domain name after GoPets obtained its service mark registration did not violate the ACPA.

However, as to the Additional Domains, the Ninth Circuit had no problem affirming the District Court's decision that they were registered in bad faith after the GOPETS mark became distinctive, for commercial gain and for the purpose of diverting consumers and creating a likelihood of confusion. The WIPO decision provided no basis for the Hise brothers to believe that they had the right to register the confusingly similar Additional Names.

The Ninth Circuit reversed the $100,000 maximum statutory damages award for gopets.com because it was not registered in bad faith, but affirmed the $1,000 minimum statutory damages awards for each of the Additional Names. The District Court did not err in refusing a jury trial on the amount of damages, as a jury could not have awarded less than the $1,000 statutory minimum. The Ninth Circuit also sent the case back to the District Court to determine if GoPets was entitled to additional relief because gopets.com infringed the GOPETS mark through the text posted to the website that it was “GoPets.com the official online website,” and also for reconsideration of the attorneys' fee award.

On Jan. 7, 2008, while the District Court case was pending, Edward Hise filed Cancellation No. 92048700 against the registration for GOPETS, alleging that the first use dates in the Statement of Use were false and that the registration was therefore fraudulently obtained. That proceeding was suspended pending the outcome of the litigation. On Sept. 22, 2009, GoPets Ltd. assigned the GOPETS registration to Zynga Game Network Inc. in California.

Although both the WIPO arbitrator and the Ninth Circuit concluded that transfer of a domain name to another owner after a mark became distinctive is not “registration” under the ACPA, there are ICANN arbitration decisions to the contrary. See, Travant Solutions, Inc. v. Cole, Nat. Arb. Forum 12/6/2003 (relying on Schmidheiny that “registration” includes subsequent re-registration with a different registrar by a different registrant); Octogen Pharmacal Company, Inc. v. Domains By Proxy, Inc./Rich Sanders and Octogen e-Solutions, WIPO D2009-0786, 8/19/2009 (transfer of a domain name is usually held to be a new registration requiring evaluation of good faith as of the date of the transfer, domain name registrant has continuing duty not to infringe); Travelhost, Inc. v. Bill Soistmann, Nat. Arb. Forum 7/23/2009 (“registration” includes renewal of a previous domain name with knowledge of the complainant's asserted rights); Semotus, Inc. v. Brendhan Hight and Mdnh Inc., Nat. Arb. Forum 5/4/2010 (bad faith must be evaluated as of the date of the transfer of the domain name).

Also, although the Ninth Circuit decision refers to the fact that Bethke's mark was registered, it is possible to base an ICANN arbitration complaint or ACPA suit on a common law (unregistered) mark, as long as the mark “is distinctive at the time of registration of the domain name.” 15 U.S.C. '1125(d)(1)(A)(ii)(I).

The Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. '1125(d)(1), prohibits registration of a domain name protected as a mark under the Lanham Act if the person: 1) has a bad faith intent to profit from that mark; and 2) registers a domain name that is identical or confusingly similar to a mark that is distinctive at the time of registration of the domain name (emphasis added). However, the ACPA does not define the term “registration.” The Ninth Circuit has now concluded that the ACPA does not apply to a domain name that is first registered prior to the time the trademark at issue becomes distinctive, even if the domain name is later re-registered by a new owner. However, the Ninth Circuit also held that the ACPA can apply to new domain names registered by the new owner after the mark acquires distinctiveness. GoPets Ltd. v. Hise, No. 08-56110 (9th Cir. 2011).

Case Background

In March 1999, Edward Hise registered the domain name gopets.com in his own name and developed a business plan for the name as part of a marketing class. He and his veterinarian cousin planned to develop a website that would be “a pet owner resource covering health, safety, nutrition, animal behavior, training, competition, abuse, pets and children, free advice from veterinarians, and the pet industry.” However, no content appeared on the website until Sept. 26, 2004. Edward and his brother Joseph also owned a corporation, Digital Overture, which provided Internet-related services such as registering and maintaining domain names.

In 2004, Erik Bethke founded GoPets Ltd. in South Korea. The company created a GoPets website that allowed virtual pets to move between the computers of registered users. GoPets Ltd. applied for a U.S. registration for the service mark GOPETS on Sept. 30, 2004, alleging a first use date in U.S. commerce of Aug. 20, 2004. The registration issued Nov. 7, 2006.

Bethke began attempts to acquire the gopets.com domain name from Edward Hise in 2004. On Sept. 1, 2004, Edward responded to Bethke's initial e-mail inquiry with information about an auction for the domain name he was planning to hold on Sept. 15, 2004. Bethke did not bid in the auction. Instead, on Oct. 11, 2004, he wrote again to Edward offering to pay $750 for the domain name. In January 2005, Bethke had a friend write to Edward inquiring about the name. Edward responded that he would not sell the domain name “for little or nothing” and that he had a potential partnering group that wanted to develop the site for a share of the profits. In May 2005, Bethke wrote to Joseph Hise, offering $100 and threatening an ICANN (Internet Corporation for Assigned Names and Numbers) arbitration proceeding if the offer was refused. A year later, Bethke filed that proceeding with the World Intellectual Property Organization (WIPO).

WIPO Decision

The WIPO arbitrator found that the gopets.com domain name was confusingly similar to the GOPETS service mark and was unconvinced that the Hise brothers ever had serious plans to develop a website at gopets.com. He nevertheless concluded that the domain name was not originally registered in bad faith because it was registered five years before GoPets Ltd. was founded. Soon after the decision issued, Edward Hise began purchasing a number of domain names, including gopet.org, gopet.biz, gopets.com, egopets.com, gopet.bz, gopets.bz, gopet.ws, gopets.ws, gopet.tv, gopet.de, gopet.eu and gopet.name. A few months later he registered mygopets.com and igopets.com (Additional Domains).

On Oct. 30, 2006, after the WIPO decision but prior to issuance of the GOPETS registration, Bethke again offered to purchase the domain name, this time for $5,000. Two weeks later he increased his offer to $40,000. He notified the Hises that his company had registered the domain name gopetslive.com, was about to start a marketing campaign and that, after Dec. 11, 2006, he would lose “all real urgency” to buy the gopets.com name. On Dec. 12, 2006, the Hise brothers sent Bethke an e-mail with a four-page letter attached, intended for Bethke's investors. The letter warned Bethke's investors that use of gopetslive.com would confuse GoPets' game users and that purchase of gopets.com would dramatically improve its search engine results. They also threatened to insert metatags into the code of gopets.com so that game users would be directed to gopets.com instead of gopetslive.com. They offered to sell the name for $5 million. Two days after sending the letter, Edward transferred the gopets.com registration to Digital Overture, the brothers' corporation.

While those exchanges were taking place, the Hises added content to the gopets.com website, eventually posting a link to the WIPO decision. On March 16, 2007, they posted text saying: “Welcome to goPets.com the official online website.”

District Court Decision

In March 2007, GoPets Ltd. filed a complaint against the Hises and Digital Overture in the U.S. District Court for the Central District of California, alleging cybersquatting under the ACPA, service mark infringement and unfair competition under the Lanham Act and California law and false advertising under California law. When GoPets Ltd. learned about the Additional Domains during discovery in the case, it amended the complaint to add similar claims concerning them. GoPets asked for an injunction, transfer of all of the domain names, statutory damages, wrongful profits, actual damages, and attorneys' fees. In May 2008, the District Court granted GoPets' motion for summary judgment on the federal ACPA and Lanham Act claims, ordered transfer of all the domain names to GoPets, awarded $100,000 in statutory damages for gopets.com and $1,000 in statutory damages for each of the remaining domain names, and awarded GoPets attorneys' fees. GoPets dropped its state law claims.

Appeals Court Decision

On appeal, the Ninth Circuit construed the term “registration” in the ACPA to mean only the initial purchase of the domain name from the original registrar. It rejected the District Court's interpretation that “registration” could also include later transfer of a domain name to another owner. The Ninth Circuit rejected a contrary opinion by the Third Circuit that the word “registration” includes a new registration contract with a new registrar and a new owner. Schmidheiny v. Weber , 319 F.3d 581 (3d Cir. 2003). The Ninth Circuit analogized the domain name transfer to transfers under traditional property law, concluding that because Edward Hise could have retained his rights to gopets.com indefinitely if he had not transferred the domain name to his corporation, there was no basis in the ACPA to determine that his right was lost when the name was transferred to a new owner. Therefore, Digital Overture's re-registration of the domain name after GoPets obtained its service mark registration did not violate the ACPA.

However, as to the Additional Domains, the Ninth Circuit had no problem affirming the District Court's decision that they were registered in bad faith after the GOPETS mark became distinctive, for commercial gain and for the purpose of diverting consumers and creating a likelihood of confusion. The WIPO decision provided no basis for the Hise brothers to believe that they had the right to register the confusingly similar Additional Names.

The Ninth Circuit reversed the $100,000 maximum statutory damages award for gopets.com because it was not registered in bad faith, but affirmed the $1,000 minimum statutory damages awards for each of the Additional Names. The District Court did not err in refusing a jury trial on the amount of damages, as a jury could not have awarded less than the $1,000 statutory minimum. The Ninth Circuit also sent the case back to the District Court to determine if GoPets was entitled to additional relief because gopets.com infringed the GOPETS mark through the text posted to the website that it was “GoPets.com the official online website,” and also for reconsideration of the attorneys' fee award.

On Jan. 7, 2008, while the District Court case was pending, Edward Hise filed Cancellation No. 92048700 against the registration for GOPETS, alleging that the first use dates in the Statement of Use were false and that the registration was therefore fraudulently obtained. That proceeding was suspended pending the outcome of the litigation. On Sept. 22, 2009, GoPets Ltd. assigned the GOPETS registration to Zynga Game Network Inc. in California.

Although both the WIPO arbitrator and the Ninth Circuit concluded that transfer of a domain name to another owner after a mark became distinctive is not “registration” under the ACPA, there are ICANN arbitration decisions to the contrary. See, Travant Solutions, Inc. v. Cole, Nat. Arb. Forum 12/6/2003 (relying on Schmidheiny that “registration” includes subsequent re-registration with a different registrar by a different registrant); Octogen Pharmacal Company, Inc. v. Domains By Proxy, Inc./Rich Sanders and Octogen e-Solutions, WIPO D2009-0786, 8/19/2009 (transfer of a domain name is usually held to be a new registration requiring evaluation of good faith as of the date of the transfer, domain name registrant has continuing duty not to infringe); Travelhost, Inc. v. Bill Soistmann, Nat. Arb. Forum 7/23/2009 (“registration” includes renewal of a previous domain name with knowledge of the complainant's asserted rights); Semotus, Inc. v. Brendhan Hight and Mdnh Inc., Nat. Arb. Forum 5/4/2010 (bad faith must be evaluated as of the date of the transfer of the domain name).

Also, although the Ninth Circuit decision refers to the fact that Bethke's mark was registered, it is possible to base an ICANN arbitration complaint or ACPA suit on a common law (unregistered) mark, as long as the mark “is distinctive at the time of registration of the domain name.” 15 U.S.C. '1125(d)(1)(A)(ii)(I).