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Domain Legal Issues

  

Fighting Domain Disputes in Court

Disclaimer – This guide is an informational resource and is not indented to take the place of legal council. If you are in the middle of a domain name dispute, the first thing you should do is consult an attorney.

This information we provide here gives you an overview of potential scenarios, and will hopefully help you avoid lawsuits by registering / buying domains that do not infringe the rights of a trademark owner.

In most cases, the easiest way to settle a domain dispute is to go through UDRP arbitration. It’s faster, it’s cheaper, and you’re not limited to the US borders. But, it does have its limits.

For one thing, the UDRP only makes rulings on cases of cybersquatting. If you need help because your name has been hijacked, then the UDRP is the wrong place to turn, that is unless you can prove that the hijacker is infringing on your trademark.

What’s more, a UDRP decision can only return a domain name to its rightful owner. The domain name dispute does not recover any losses for the trademark owner or the domain name owner. Civil suits are the only way for either party to recover these losses and this is the path often taken by domain name owners for companies who “reverse hijack domain names”. Reverse hijacking is where a company tries to take a domain name from its rightful owner by misusing the UDRP.

A US federal law that protects trademark owners against ‘cybersquatting’ was passed in 1999 and is called the Anti-cybersquatting Consumer Protection Act (ACPA). The law not only prohibits the bad faith use of trademarked names in a domain name, but also prohibits the confusingly similar names to the trademark (referred to as typo-squatting).

Unlike UDRP decisions, the results of an ACPA trial can be very expensive. Aside from legal fees, the courts can award plaintiffs up to $100,000 per domain name violation. So, someone buying 10 misspellings of Disney.com and profiting from the typo-traffic, could end up paying a million dollars in damages!

Proving Cybersquatting in Court

To win a case against a cybersquatter, a plaintiff must prove two things:

  1. That the defendant registered / bought the domain intending to use it for bad faith profit.
  2. That the trademark was registered or famous at the time of the registration.

Notice the operable word here: profit. So, if John Jones registers the domain name ‘WalmartBomb.com’ and uses the site to host a forum that discusses Wal-Mart’s misconduct in the business world, he’s safe from their lawyers as long as he doesn’t make any money, right? Wrong.

The ACPA does spell out some of the possible scenarios of bad faith profit and they don’t all include money. If the domain owner is using the domain name to tarnish the good name of the trademark holder, he/she could be guilty of bad faith. The defendant can also be found guilty if they have a record of cybersquatting or if they register the domain name using improper contact information.

Bad faith can also mean trying to divert the trademark owner’s consumers to the defendant’s site by giving them the impression that the site is somehow related to, affiliated with, or endorsed by the trademark holder. This doesn’t always mean by virtue of what’s posted on the site, but can mean by the domain name itself.
As in the case with UDRP proceedings, the burden of proof falls on the plaintiff. But for some of the larger corporations who have very deep pockets, it’s not very burdensome at all.

Just a quick word of advice here- if you don’t have the money to fight a giant corporation in court, then don’t do anything that could possibly be misconstrued as trademark infringement. Every now and then, a larger company loses when they try to bring down a small entity, but the incredible legal fees that a small company incurs sometimes makes the fight seem futile.

What’s more, the controversial practice of typo-squatting is now under some interesting development. Dell recently filed lawsuits against several companies for registering and benefiting from the use of their trademark. But they didn’t use the ACPA law, because that would limit their winnings to $100,000 per domain name. Instead, they filed charges of counterfeiting for which the penalty is up to $1,000,000 per violation!

Cease and Desist Letters

Before bringing a case to court, most companies will send out a cease and desist letter, advising a domain name owner to give up or transfer the name to them. The letter will use obvious legal scare tactics, like threatening to take “further legal recourse”.

The very worst thing a domain owner can do at this point is to offer to sell the domain, whether to the trademark owner or to any third party. Doing so will prove a case of cybersquatting and the domain owner may loose the name and be required to pay whatever fees the court decides is just.

If the domain name is already up for sale, the domain owner would do best to take it down and stop using it until after consulting an attorney.



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