Recent Issues in Cybersquatting Disputes

That said, the ACPA does not seem to have accomplished the goal of ending ' or even significantly curtailing ' cybersquatting. In fact, cybersquatting seems to have spread in recent years to newer Internet platforms like Facebook and Twitter. Moreover, it could also soon proliferate to new domain suffixes. The Internet Corporation for Assigned Names and Numbers (ICANN) is currently in the process of creating a new set of generic top-level domains (gTLDs) after voting to end what were perceived to be arbitrary restrictions on their use. (gTLDs are the suffixes that conclude domain name addresses, the most prominent of which include .com, .edu and .gov.) Given this decision by ICANN, the issue of how companies minimize the deleterious aspects of cybersquatting on the good will and value associated with their brand is unlikely to disappear any time soon.

There are several pressing issues within the realm of cybersquatting, including: recent heightened scrutiny applied by courts to cybersquatters and the operators who host their domains; the various methods by which companies attempt to combat the problem; and whether cybersquatting will become a substantial problem on newer platforms, such as social networking sites and on the forthcoming new gTLDs.

Cyber- and Typosquatting

Cybersquatting in the broadest sense involves the registration of a domain name containing indicia referential to the registered trademarks of another entity. Given the omnipresent issues associated with customer confusion that are particularly acute in the context of Internet commerce, cybersquatters often possess significant leverage with the trademark owner when it comes to “negotiating” over the sale of the squatted-upon domain name. If the owner decides not to purchase the potentially infringing domain name, it risks economic loss and the dilution in value of its trademarks.

Because it can sometimes create substantial pecuniary benefits, practices similar to cybersquatting have also emerged in recent years. For example, “domaining” has become another prominent threat to trademark owners' attempts to preserve the value and reputation associated with their marks. In essence, domaining is the business of registering a specific domain name, then adding zero content to the associated website aside from pay for click advertisements. Domaining can be lucrative, as it relies on the tendency of Internet users to type in the domain name in their browser search box, rather than in a search engine.

“Typosquatting” is another related practice, as it involves registrants owning domain names with similar spelling to those of popular websites with the hopes that a user will input a typo while searching for the popular website and therefore accidentally end up on the domain with the typo. Finally, individuals wishing to profit from the goodwill and value of a trademark or other indicia associated with a popular brand or person have taken to creating fake profiles on social media claiming affiliation or a relationship with the brand or person.

Given the panoply of methods available to profit from mere ownership of a domain name associated with a particular company or individual, courts have been forced to confront myriad consequences resulting from cybersquatting. In theory, the ACPA should serve as a formidable deterrent to cybersquatting, as it renders the user civilly liable for utilizing a domain name with bad faith intent to profit from the protected mark of another party. (See,'e.g., Sporty's Farm v. Sportsman's Market, 202 F.3d 489 (2d Cir. 2000) (company that registers domain name using competitor's mark prior to entering into business and simply to prevent competitor from registering evinces bad faith). But see, Lamparello v. Falwell, 420 F.3d 309 (4th Cir. 2005) (appellant's website criticizing the views of Jerry Falwell did not constitute a bad faith intent to profit, and therefore was not actionable under the ACPA).) Nonetheless, as the practice continues seemingly unabated, recent decisions have acknowledged the need for a more expanded effort, and have thus afforded new enforcement options for trademark owners.

In Academy of Motion Pictures Arts and Sciences v. GoDaddy.com, 2-10-CV-03738 (C.D. Calif. 2013), the plaintiff sued defendant for functionally abetting cybersquatting because the defendant hosted over 100 domain names that infringed on five of plaintiff's marks, including “OSCAR” and “Academy Awards.” Specifically, the defendant was alleged to have created a “parking” program in which ad-revenue was shared between the owner of a parked domain name and the defendant registrant. A parked domain is essentially one purchased but never used for e-mail, a website or any other service.

In response to the plaintiff's motion for summary judgment, the defendant moved for summary judgment pursuant to the safe harbor of the ACPA, which immunizes registrars for damages “for the registration or maintenance of a domain name for another absent a showing of bad faith.” The California federal court rejected this argument in stating that the parking program was distinct from the defendant's protected function as a registrar. Specifically, the district court noted that the parking program applies to pages already registered with the defendant, indicating that the defendant has already fulfilled its registration role prior to any activities thereafter associated with the parking program. Additionally, the parking program entailed defendant's creation and placement of advertisements on the websites associated with the domain names involved in cybersquatting, and could therefore not be considered merely a registration function. Finally, the court rejected the defendant's contention that because the plaintiff could not definitively show that the defendant had derived revenue from the parking program, the plaintiff was thereby entitled to the safe harbor. In doing so, the court noted that “bad faith intent” was sufficient to disqualify the defendant from the safe harbor, irrespective of verifiable economic loss.

Though the holding in GoDaddy appears limited to the circumstances in which a website operator takes volitional acts (aside from registration) as a means of abetting those who wish to profit from cybersquatting, the case nonetheless could assist copyright and trademark owners. Specifically, the actual entities who purchase the domain names and are thus named as the registrant often reside offshore, thereby creating issues for owners in obtaining jurisdiction. Conversely, most large website operators have sufficient geographical or commercial contacts with the United States so that jurisdictional issues are less likely to materialize. Most important, if courts begin to articulate circumstances in which operators could be liable for the acts of those who own domain names registered therein, operators will have increased incentive to prevent cybersquatting rather than simply ignoring it.

Remedies

In acknowledging both the jurisdictional issues rife in combating cybersquatting and the common inability of courts to react with sufficient speed to the damage associated with infringing domain names, at least one court has expanded the breadth of remedies for trademark owners. In Louis Vuitton Malletier, S.A., v. 100wholesale.com, 12-21778 (S.D.Fla. 2012), a French luxury clothing and accessory manufacturer sued a domain name registrant for alleged trademark infringement on many of its websites. The domain names in question utilized the plaintiff's trademarks in an unauthorized fashion to sell imitation goods. In response, the district court granted a temporary injunction for the plaintiff based on the high likelihood of customer confusion and economic loss that would result from the unauthorized use of the trademarks. (The court granted a default judgment against the defendant in the case in March 2013.)

Interestingly, the district court took the additional step of requiring that the domain name host provide the plaintiff's attorney with the identity and contact information of the registrants for the infringing sites, irrespective of whether the registrant had taken previous steps to conceal their identity via privacy protection sites. This compelled disclosure of the true identities of infringing registrants could be critical to trademark owners as they endeavor to respond quickly to cybersquatting. Additionally, owners could now be able to compile a database of habitual offenders that can be utilized to make mass cybersquatting litigation more accurate and efficient. (See also, Ally Financial v. Jones,'13-00139 (D.Ariz. 2013) (individual previously held liable for cybersquatting must disclose all domain names he owns, even if some of those domain names have yet to be proven to be infringing).)

Intellectual property owners possess another prominent avenue to obtain redress for cybersquatting. ICANN operates an administrative proceeding for owners under its Uniform Domain Name Dispute Resolution (UDRP) policy. ICANN retains jurisdiction over these disputes because when a registrant buys a domain name, it must agree to participate in an arbitration type hearing if they are ever accused of trademark infringement. In general, UDRP proceedings are considered less costly and time-consuming than pursuing litigation. UDRP hearings are also considered to be pro-plaintiff because the adjudicators are often former trademark lawyers. On the other hand, a victorious owner in the proceeding is entitled to a single remedy: the cancellation or transfer of the infringing domain name. Moreover, if more courts follow the holding in Louis Vuitton, owners may be able to utilize the ACPA in a broader and more effective way going forward.

Conclusion

As noted in the introduction to this article, in 2011 ICANN announced that it was launching a process to create 19 new gTLDs as a means of ushering in a platform for a new generation of creativity and inspiration. Ultimately, ICANN received 1,900 applications, more than 700 of which were contested. As of several weeks ago, adjudicatory panels of the World Intellectual Property Organization's Arbitration and Mediation Center have been spending considerable time determining which new gTLDs will ultimately be verified and who will own them. As of September 2013, the panel already issued rulings concerning ownership of gTLDs such as .music, .eco and .vip.

Most commentators are not optimistic that expanding the universe of available gTLDs will be of any material help in preventing cybersquatting. In fact, most believe that it will likely exacerbate the existing issues. Specifically, one advocacy group argues that it will create even more opportunities for marketers to create consumer confusion as a means of unjustly enriching themselves off the trademarks of others. On the other hand, evidence shows that to date the .com gTLD has constituted over 80% of the trademark infringement disputes, so the impact of adding additional gTLDs, and thus additional opportunities for cybersquatting, could be minimal.

Elsewhere, disputes over cybersquatting have also become more prominent on formats not in existence at the time of passage of the ACPA in 1999. Social networking sites in particular are now the latest battlefield between content owners and alleged cybersquatters. The most prominent dispute occurred on Twitter in 2009 after a user created an account utilizing the name and likeness of a prominent sports personality to issue disparaging and negative sentiments. The personality, former Major League Baseball manager Tony La Russa, sued Twitter under a theory analogous to cybersquatting in alleging that the statements of the user were made in bad faith and intended to divert traffic from his authentic website and diminishing the quality of his mark. The case settled, but Twitter soon after enacted a “Name Squatting” policy that prevented any attempt to sell or extort a fictitious user account. Facebook also instituted a similar policy. As social networking continues to expand, companies must continue to be vigilant in protecting their trademarks from fake accounts that could create customer confusion and potentially damage their business.

Ultimately, cybersquatting remains a significant and vexing problem for many trademark owners. In recent months, courts seem to be attempting to address the issue in inventive and forceful ways. However, as social networks become even more ubiquitous, and a surfeit of new gTLDs become viable, cybersquatting is likely to present a sizable problem for trademark owners for the foreseeable future.

Richard Raysman is a partner based in the New York office of Holland & Knight. Peter Brown is the principal at Peter Brown & Associates in New York City and a member of this newsletter's Board of Editors. They are co-authors of Computer Law: Drafting and Negotiating Forms and Agreements (Law Journal Press).

According to the federal statute designed to prevent the practice, cybersquatting is the act of “registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else.” In a typical scenario, the cybersquatter offers to sell the domain name to the entity associated with the particular trademark for an inflated price. This offer to sell is sometimes viewed as evincing bad faith and therefore actionable in court if the owner wishes. In other instances, the offer is considered reasonable, or at least not indicative of bad faith, and therefore the trademark owner is forced to either purchase the domain or accept the consequences of the existence of a substantially similar domain name.

The ACPA

This dilemma can create difficulties for intellectual property owners whose material is often posted online without consent. If they wish to sue, intellectual property owners may employ various mechanisms that purport to combat cybersquatting. Most prominent of those is the statute quoted above, the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. '1125(d). The purpose behind the ACPA is to “provide clarity in the law for trademark owners by prohibiting bad faith and abusive registration of distinctive marks as Internet domain names.”

That said, the ACPA does not seem to have accomplished the goal of ending ' or even significantly curtailing ' cybersquatting. In fact, cybersquatting seems to have spread in recent years to newer Internet platforms like Facebook and Twitter. Moreover, it could also soon proliferate to new domain suffixes. The Internet Corporation for Assigned Names and Numbers (ICANN) is currently in the process of creating a new set of generic top-level domains (gTLDs) after voting to end what were perceived to be arbitrary restrictions on their use. (gTLDs are the suffixes that conclude domain name addresses, the most prominent of which include .com, .edu and .gov.) Given this decision by ICANN, the issue of how companies minimize the deleterious aspects of cybersquatting on the good will and value associated with their brand is unlikely to disappear any time soon.

There are several pressing issues within the realm of cybersquatting, including: recent heightened scrutiny applied by courts to cybersquatters and the operators who host their domains; the various methods by which companies attempt to combat the problem; and whether cybersquatting will become a substantial problem on newer platforms, such as social networking sites and on the forthcoming new gTLDs.

Cyber- and Typosquatting

Cybersquatting in the broadest sense involves the registration of a domain name containing indicia referential to the registered trademarks of another entity. Given the omnipresent issues associated with customer confusion that are particularly acute in the context of Internet commerce, cybersquatters often possess significant leverage with the trademark owner when it comes to “negotiating” over the sale of the squatted-upon domain name. If the owner decides not to purchase the potentially infringing domain name, it risks economic loss and the dilution in value of its trademarks.

Because it can sometimes create substantial pecuniary benefits, practices similar to cybersquatting have also emerged in recent years. For example, “domaining” has become another prominent threat to trademark owners' attempts to preserve the value and reputation associated with their marks. In essence, domaining is the business of registering a specific domain name, then adding zero content to the associated website aside from pay for click advertisements. Domaining can be lucrative, as it relies on the tendency of Internet users to type in the domain name in their browser search box, rather than in a search engine.

“Typosquatting” is another related practice, as it involves registrants owning domain names with similar spelling to those of popular websites with the hopes that a user will input a typo while searching for the popular website and therefore accidentally end up on the domain with the typo. Finally, individuals wishing to profit from the goodwill and value of a trademark or other indicia associated with a popular brand or person have taken to creating fake profiles on social media claiming affiliation or a relationship with the brand or person.

Given the panoply of methods available to profit from mere ownership of a domain name associated with a particular company or individual, courts have been forced to confront myriad consequences resulting from cybersquatting. In theory, the ACPA should serve as a formidable deterrent to cybersquatting, as it renders the user civilly liable for utilizing a domain name with bad faith intent to profit from the protected mark of another party. (See,'e.g., Sporty's Farm v. Sportsman's Market, 202 F.3d 489 (2d Cir. 2000) (company that registers domain name using competitor's mark prior to entering into business and simply to prevent competitor from registering evinces bad faith). But see, Lamparello v. Falwell, 420 F.3d 309 (4th Cir. 2005) (appellant's website criticizing the views of Jerry Falwell did not constitute a bad faith intent to profit, and therefore was not actionable under the ACPA).) Nonetheless, as the practice continues seemingly unabated, recent decisions have acknowledged the need for a more expanded effort, and have thus afforded new enforcement options for trademark owners.

In Academy of Motion Pictures Arts and Sciences v. GoDaddy.com, 2-10-CV-03738 (C.D. Calif. 2013), the plaintiff sued defendant for functionally abetting cybersquatting because the defendant hosted over 100 domain names that infringed on five of plaintiff's marks, including “OSCAR” and “Academy Awards.” Specifically, the defendant was alleged to have created a “parking” program in which ad-revenue was shared between the owner of a parked domain name and the defendant registrant. A parked domain is essentially one purchased but never used for e-mail, a website or any other service.

In response to the plaintiff's motion for summary judgment, the defendant moved for summary judgment pursuant to the safe harbor of the ACPA, which immunizes registrars for damages “for the registration or maintenance of a domain name for another absent a showing of bad faith.” The California federal court rejected this argument in stating that the parking program was distinct from the defendant's protected function as a registrar. Specifically, the district court noted that the parking program applies to pages already registered with the defendant, indicating that the defendant has already fulfilled its registration role prior to any activities thereafter associated with the parking program. Additionally, the parking program entailed defendant's creation and placement of advertisements on the websites associated with the domain names involved in cybersquatting, and could therefore not be considered merely a registration function. Finally, the court rejected the defendant's contention that because the plaintiff could not definitively show that the defendant had derived revenue from the parking program, the plaintiff was thereby entitled to the safe harbor. In doing so, the court noted that “bad faith intent” was sufficient to disqualify the defendant from the safe harbor, irrespective of verifiable economic loss.

Though the holding in GoDaddy appears limited to the circumstances in which a website operator takes volitional acts (aside from registration) as a means of abetting those who wish to profit from cybersquatting, the case nonetheless could assist copyright and trademark owners. Specifically, the actual entities who purchase the domain names and are thus named as the registrant often reside offshore, thereby creating issues for owners in obtaining jurisdiction. Conversely, most large website operators have sufficient geographical or commercial contacts with the United States so that jurisdictional issues are less likely to materialize. Most important, if courts begin to articulate circumstances in which operators could be liable for the acts of those who own domain names registered therein, operators will have increased incentive to prevent cybersquatting rather than simply ignoring it.

Remedies

In acknowledging both the jurisdictional issues rife in combating cybersquatting and the common inability of courts to react with sufficient speed to the damage associated with infringing domain names, at least one court has expanded the breadth of remedies for trademark owners. In Louis Vuitton Malletier, S.A., v. 100wholesale.com, 12-21778 (S.D.Fla. 2012), a French luxury clothing and accessory manufacturer sued a domain name registrant for alleged trademark infringement on many of its websites. The domain names in question utilized the plaintiff's trademarks in an unauthorized fashion to sell imitation goods. In response, the district court granted a temporary injunction for the plaintiff based on the high likelihood of customer confusion and economic loss that would result from the unauthorized use of the trademarks. (The court granted a default judgment against the defendant in the case in March 2013.)

Interestingly, the district court took the additional step of requiring that the domain name host provide the plaintiff's attorney with the identity and contact information of the registrants for the infringing sites, irrespective of whether the registrant had taken previous steps to conceal their identity via privacy protection sites. This compelled disclosure of the true identities of infringing registrants could be critical to trademark owners as they endeavor to respond quickly to cybersquatting. Additionally, owners could now be able to compile a database of habitual offenders that can be utilized to make mass cybersquatting litigation more accurate and efficient. (See also, Ally Financial v. Jones,'13-00139 (D.Ariz. 2013) (individual previously held liable for cybersquatting must disclose all domain names he owns, even if some of those domain names have yet to be proven to be infringing).)

Intellectual property owners possess another prominent avenue to obtain redress for cybersquatting. ICANN operates an administrative proceeding for owners under its Uniform Domain Name Dispute Resolution (UDRP) policy. ICANN retains jurisdiction over these disputes because when a registrant buys a domain name, it must agree to participate in an arbitration type hearing if they are ever accused of trademark infringement. In general, UDRP proceedings are considered less costly and time-consuming than pursuing litigation. UDRP hearings are also considered to be pro-plaintiff because the adjudicators are often former trademark lawyers. On the other hand, a victorious owner in the proceeding is entitled to a single remedy: the cancellation or transfer of the infringing domain name. Moreover, if more courts follow the holding in Louis Vuitton, owners may be able to utilize the ACPA in a broader and more effective way going forward.

Conclusion

As noted in the introduction to this article, in 2011 ICANN announced that it was launching a process to create 19 new gTLDs as a means of ushering in a platform for a new generation of creativity and inspiration. Ultimately, ICANN received 1,900 applications, more than 700 of which were contested. As of several weeks ago, adjudicatory panels of the World Intellectual Property Organization's Arbitration and Mediation Center have been spending considerable time determining which new gTLDs will ultimately be verified and who will own them. As of September 2013, the panel already issued rulings concerning ownership of gTLDs such as .music, .eco and .vip.

Most commentators are not optimistic that expanding the universe of available gTLDs will be of any material help in preventing cybersquatting. In fact, most believe that it will likely exacerbate the existing issues. Specifically, one advocacy group argues that it will create even more opportunities for marketers to create consumer confusion as a means of unjustly enriching themselves off the trademarks of others. On the other hand, evidence shows that to date the .com gTLD has constituted over 80% of the trademark infringement disputes, so the impact of adding additional gTLDs, and thus additional opportunities for cybersquatting, could be minimal.

Elsewhere, disputes over cybersquatting have also become more prominent on formats not in existence at the time of passage of the ACPA in 1999. Social networking sites in particular are now the latest battlefield between content owners and alleged cybersquatters. The most prominent dispute occurred on Twitter in 2009 after a user created an account utilizing the name and likeness of a prominent sports personality to issue disparaging and negative sentiments. The personality, former Major League Baseball manager Tony La Russa, sued Twitter under a theory analogous to cybersquatting in alleging that the statements of the user were made in bad faith and intended to divert traffic from his authentic website and diminishing the quality of his mark. The case settled, but Twitter soon after enacted a “Name Squatting” policy that prevented any attempt to sell or extort a fictitious user account. Facebook also instituted a similar policy. As social networking continues to expand, companies must continue to be vigilant in protecting their trademarks from fake accounts that could create customer confusion and potentially damage their business.

Ultimately, cybersquatting remains a significant and vexing problem for many trademark owners. In recent months, courts seem to be attempting to address the issue in inventive and forceful ways. However, as social networks become even more ubiquitous, and a surfeit of new gTLDs become viable, cybersquatting is likely to present a sizable problem for trademark owners for the foreseeable future.

Richard Raysman is a partner based in the New York office of Holland & Knight. Peter Brown is the principal at Peter Brown & Associates in New York City and a member of this newsletter's Board of Editors. They are co-authors of Computer Law: Drafting and Negotiating Forms and Agreements (Law Journal Press).