Legal Actions Against Cybersquatters and Domain Names - Domain Name Law & Domain Name Disputes

Victims of cybersquatting have several options they can choose from to stop a cybersquatter’s misconduct and recover their domain names. Initially, a trademark holder may simply wish to send a cease-and-desist letter to the cybersquatter, demanding that the cybersquatter return the domain name immediately. Such a cease-and-desist letter may state that if the cybersquatter does not comply with the letter, the trademark holder will file a lawsuit, which could result in serious consequences to the cybersquatter. The cease-and-desist letter is an inexpensive approach, which can often bring positive results.

Once a cybersquatting victim decides that he or she needs to adopt a more aggressive approach, there are two primary domain name rules providing legal channels for recovering a domain name: the Anticybersquatting Consumer Protection Act (“ACPA”) and ICANN’s Uniform Domain Name Dispute Resolution Policy (“UDRP”).

The ACPA allows trademark holders to file lawsuits against cybersquatters in the United States federal courts, and allows for the recovery of up to $100,000 per domain name in damages from the cybersquatter, plus costs and fees. The ACPA also addresses situations where the cybersquatter is located in a foreign country, or where the cybersquatter cannot be identified at all. In such situations, the ACPA enables the cybersquatting victim to recover his or her domain name, but does not allow for the recovery of damages. This process is referred to as an in rem action. The ACPA is set forth in the United States Lanham Act (15 U.S.C. §1125(d)), which is the comprehensive federal law on the topic of trademark infringement.

ICANN, the nonprofit organization that oversees the domain name registration system, has also promulgated rules governing domain name disputes. When anyone registers a domain name, that person is required to submit to binding arbitration in the event of a dispute concerning that domain name, including an allegation of cybersquatting. This binding arbitration is conducted according to ICANN’s Uniform Domain-Name Dispute Resolution Policy (“UDRP”). UDRP proceedings are intended to offer an efficient process, where the issues are decided without a trial or oral hearing. Unlike a lawsuit brought under ACPA, however, UDRP does not allow for the recovery of damages, costs, or fees.

What Is Cybersquatting?

Cybersquatting refers to the bad faith registration of a domain name containing another person’s brand or trademark in a domain name. In one variation of cybersquatting, called typosquatting, a cybersquatter registers domain names containing variants of popular trademarks.  Typosquatters rely on the fact that Internet users will make typographical errors when entering domain names into their web browsers. Once a cybersquatter has registered such a domain name, the cybersquatter can place advertisements on a website linked to that domain name, and collect income any time an Internet user clicks on one of those advertisements. Alternatively, the cybersquatter may seek to sell the domain name to the legitimate trademark holder at a price many times what the cybersquatter paid for it.

Some common examples of cybersquatting include:

The omission of the “dot” in the domain name: wwwexample.com;

A common misspelling of the intended site: exemple.com

A differently phrased domain name: examples.com

A different top-level domain: example.org

In addition to registering variants of trademarks, cybersquatters also rely on the fact that trademark holders often forget to re-register their domain names. Because domain name registrations last for a fixed period of time, if the owner of a domain name does not re-register the domain name prior to expiration, then the domain name can be purchased by anybody. Cybersquatters will snatch up a domain name as it becomes available. This process is often referred to as “renewal snatching.”

Victims of cybersquatting have several options to combat cybersquatting. These options include: sending cease-and-desist letters to the cybersquatter, bringing an arbitration proceeding under ICANN’s rules (ICANN is the nonprofit organization that oversees the domain name registration system), or bringing a lawsuit in state or federal court. Whatever strategy a victim of cybersquatting elects to use, that person should not dismiss the serious effects that cybersquatting can have if left unchecked.

Suing A Cybersquatter Personally (In Personam Claims Under Anticybersquatting Consumer Protection Act)

Where a trademark owner has identified the cybersquatter, and that cybersquatter is located in the United States—or has significant contacts with the United States—the trademark owner can bring an in personam claim under the federal Anticybersquatting Consumer Protection Act (“ACPA”). As contrasted with an in rem claim under the ACPA, an in personam claim enables a cybersquatting victim to recover damages, costs, and fees, in addition to recovering the domain name at issue. For a trademark owner to bring an in personam claim under the ACPA, the trademark owner must show:

• Ownership of the trademark;
• Ownership of a trademark may be demonstrated through a federal, state, or foreign registration trademark registration. Where no registration exists, common-law trademark rights can be demonstrated through the continuous use of the trademark in commerce.

• The trademark is distinctive or famous;
• A trademark is distinctive if it identifies the trademark owner’s goods or services. Courts consider several factors when determining whether a trademark is distinctive or famous, including but not limited to: the length of time the mark has been in use; the amount of investment made in promoting the mark; the geographic region where the mark is used; and whether there are similar trademarks in use.

• The domain name and trademark are either identical or confusingly similar (or dilutive for famous trademarks); and

• The domain name registrant acted in bath faith to profit from the trademark.

Courts consider several factors when determining whether a domain name registrant acted in bad faith, including but not limited to: the registrant’s trademark or other intellectual property rights (if any) in the domain name; the registrant’s prior use (if any) of the domain name in connection with the bona fide offering of goods or services; the registrant’s intent to divert consumers from the trademark owner’s website to a website accessible under the domain name, creating a likelihood of confusion as to the source of the website; and the registrant’s offer to sell the domain name for financial gain without having used the domain name in for the bona fide offering of any goods or services.

Sue The Domain Name And Not The Cybersquatter (In Rem Claims Under ACPA)

The federal Anticybersquatting Consumer Protection Act (“ACPA”) enables cybersquatting victims to recover their domain names even when the cybersquatter is located in another country, or where the cybersquatter cannot be identified at all. Such actions are referred to as in rem actions. While cybersquatting victims cannot recover damages, costs, or fees with an in rem action, they can recover their domain names. To succeed with an in rem action under the ACPA, the trademark owner must show:

• Ownership of the trademark;
• The trademark is distinctive or famous;
• The domain name and trademark are either identical or confusingly similar (or dilutive for famous marks);
• The plaintiff has tried to inform the registrant of the domain name of the violation and the plaintiff’s intent to file an in rem action; and
• The court does not have jurisdiction over the registrant, or the plaintiff was unable to find the registrant, despite a good faith effort to do so.

To date, it is unclear whether the definition of cybersquatting is narrower for in rem claims under ACPA, as compared with in personam actions. Specifically, ambiguity continues to exist as to whether a plaintiff in an in rem action must demonstrate the registrant's “bad faith.”

Actions Under ICANN’s Uniform Domain Name Dispute Resolution Policy

When a domain is registered, the person registering that domain name is required to submit to mandatory arbitration in the event of a future dispute concerning the domain, including an allegation of cybersquatting. ICANN—the nonprofit organization that oversees the domain name registration system—has implemented a streamlined process for resolving cybersquatting disputes, which tends to be quicker and less expensive than federal litigation. While ICANN’s Uniform Dispute Resolution Policy does not permit cybersquatting victims to recover damages, costs, or fees, it does enable them to recover a cybersquatted domain name. A petitioner seeking to use ICANN’s Uniform Dispute Resolution Policy ("UDRP"), must demonstrate the following elements to recover a domain name:

• Ownership of a trademark;
• A domain name that is identical or confusingly similar to the trademark owned;
• The registrant has no legitimate interest or rights in the domain name, which may be demonstrated through: showing a lack of a bona fide intent to use the disputed domain to offer goods or services, and showing common knowledge of the trademark owner’s ownership of the mark; and
• The registrant’s registration and use has been conducted in bad faith, which may include evidence that: a) that the domain was acquired primarily to sell to the trademark owner, c) the domain name was acquired to disrupt business of a competitor, d) the domain name was acquired to make money through consumer confusion.

An administrative panel of one or three people selected from an international body of Internet law practitioners serves as both the judge and the jury in a UDRP proceeding. A UDRP proceeding is relatively quick: A decision is typically issued less than 45 days after the complaint is filed. Notably, a party that files a UDRP complaint and loses may bring another legal action against a cybersquatter, including an action under the Anticybersquatting Consumer Protection Act.

Notable Arbitration Decisions

AnthonyQuinn.com

• The estate of Anthony Quinn, the renowned artist and two-time Oscar-winning actor, filed a UDRP complaint against the registrant of AnthonyQuinn.com. The Quinn estate claimed that Anthony Quinn’s fame and success as both an artist and actor made his name internationally known in multiple categories of goods and services, including entertainment services, jewelry, watches, award statuettes, and entertainment awards.
• The UDRP panel found that the registrant was not using the domain in connection with the bona fide offering of goods or services or making a legitimate non-commercial or fair use of the domain, because the registrant used the disputed domain to operate a website featuring links to various competing and non-competing commercial websites for the registrant’s own commercial gain, which was evidence of the registrant’s bad faith registration and use.

CarmenElectra.com

• The actress Carmen Electra brought a UDRP arbitration action against the registrant of CarmenElectra.com. The registrant used the disputed domain to divert traffic to a website located at www.celebrity1000.com, a commercial website providing biographical information on some actors but not Carmen Electra.
• The UDRP panel ordered the transfer of the disputed domain to Ms. Electra, finding that the public associates the name Carmen Electra with Ms. Electra’s performance services. The panel also found that the registrant had no rights or legitimate interests in the disputed domain, and the registrant registered and used the disputed domain in bad faith.

RoyalCaribbeanCruiseLine.com

• Royal Caribbean Cruises Ltd. brought a UDRP arbitration against the registrant of royalcaribbeancruiseline.com, royalcaribbeancruiseline.com, and royalcaribbeancruiselines.com.
• The UDRP panel denied the relief sought by Royal Caribbean because the registrant of the disputed domains presented evidence that he was a contractually authorized distributor of Royal Caribbean’s product. As such, the arbitrator found that there was no evidence of bad faith in the registrant’s registration and use of the disputed domains.

Class Actions Against Cybersquatters

While the idea of a class action against cybersquatters has not been tested, legal authorities indicate that such an action may prove viable. A class action is a lawsuit that is brought by a small number of plaintiffs (“representative plaintiffs”) on behalf of larger group (the “class”). Thus, for example, a single trademark holder could theoretically bring a lawsuit against a cybersquatter on behalf of both itself and other trademark holders who have been injured by the cybersquatter’s misconduct. A class action may be an effective tool against a cybersquatter because it threatens the cybersquatter with liability for numerous lawsuits within a single legal proceeding. 

Class actions are possible where: 1) the class is so numerous as to make separate lawsuits impractical, 2) there are questions of law or fact common to the class, 3) the claims and defenses of the representative plaintiff is typical of the claims and defenses of the class, and 4) the representative plaintiff will fairly and adequately protect the interests of the class. In the context of cybersquatting, it is quite possible that trademark holders would satisfy these standards. Specifically, a cybersquatter may have infringed upon the rights of a class of trademark holders by registering numerous domain names infringing on their trademarks. Unlike a traditional anti-cybersquatting action, with a class action, the cybersquatter could be forced to turn over a major portion of its domain portfolio, as well as potentially pay significant damages. 

In the same vein, legal authorities have postulated that a class action may be possible where the class is composed of consumers rather than trademark holders. Under this conception of the class action, a single consumer could bring a lawsuit on behalf of other consumers who have been mistakenly led to the cybersquatted website. Again, the benefit of such a class action is that the cybersquatter will face potential liability for its misconduct as to all consumers, and not merely to the representative plaintiff. 

While the cybersquatting class action remains a new concept, attorneys who are experienced in anti-cybersquatting law have expressed a vigorous interest in pursuing these claims.

The Big Business Of Selling Domain Names

Domain names are big business. For the past several years, domain names, the “real estate of the Internet,” have generated substantial returns for savvy investors, who often refer to themselves as “domainers.”Prior to the rise of pay-per-click advertising, domain name speculators would acquire desirable or trademarked domain names and then simply sit on them, hoping that they could sell them later on for a profit. 

Today, a domain name holder can display pay-per-click advertising on a website, and sit-back and let the money roll in while Internet users click on those ads. A single domain name can bring in hundreds of dollars a day, and many domain name holders have thousands or even millions of domain names. 

The ability of a domain name to generate money through pay-per-click advertising depends on the likelihood that users will type in that domain name. As such, a domain that is a common word or phrase, or which incorporates a well known trademark, can draw in a constant stream of Internet users. In order to make money from a domain name, only a fraction of the Internet users who type in a domain name need to click on an ad. Each click can bring in anywhere from a few cents to a few dollars. 

As a result of this business model, the value of desirable domain names has skyrocketed. Domain names can routinely fetch five or six figures. And in 2007, the domain name porn.com, reportedly sold for $9.5 million. The following domain names also reportedly fetched over a million dollars: business.com, asseenontv.com, altavista.com, wine.com, creditcards.com, and autos.com. 

An entire secondary industry has developed around the buying and selling of domain names, including a vibrant online auction process for domain names. Several companies now offer appraisal services for domain names; the appraisal can cost anywhere from $10 to $100. Companies like Sedo and SnapNames hold domain name auctions, and serve as conduits for the sale of domain names, and enjoy a hefty commission for their assistance. 

“Domaining” is big business, and cybersquatting is not a petty crime. Rather, cybersquatting can involve substantial money and serious legal claims. Accordingly, trademark owners must be proactive in policing the misuse of their trademarks by cybersquatters. The failure to do so could result in substantial losses, as the above numbers reveal.