Uprooting the Cybersquatter: The Anticybersquatting Act and the End of Cyberpiracy

The Internet age has created a variety of new means of making money. Much to the dismay of many established companies, one new internet scheme is “cybersquatting”, a practice whereby a third party registers a domain name containing another company’s established trademark (i.e., “www.disney.com”), either with the intent to sell the domain name (for a hefty price, of course) to the legitimate trademark owner, divert consumers from the trademark owner’s website or some combination of both. With a few limited exceptions, the law did not provide an effective remedy to those injured by cybersquatting, because this conduct did not fit within the traditional definitions of activities that constituted trademark infringement.

Until now, the federal trademark laws (the Lanham Act) only protected against infringing commercial uses. Several trademark owners had commenced lawsuits against cybersquatters under the Lanham Act, but a number of courts held that, because the defendants in those cases merely registered domain names and nothing more, there had been no requisite “commercial use” of the marks in the sale or advertising of goods or services under the Lanham Act, and therefore, no infringement. Although a few cases did find an infringing use where the domain name owner had sought to sell the name to a third party, the attempt to make the sale constituted a “use” in commerce and is therefore considered a violation of the Lanham Act, these were arguably decisions that strained the legal analysis to fit the desired holding.¹

On November 29, 1999, as part of the omnibus budget bill, President Clinton signed into law the “Anticybersquatting Consumer Protection Act.”² The Anticybersquatting Act fills in this gap in the existing trademark laws by establishing a cause of action for trademark infringement against anyone who registers a domain name that is, (i) identical or confusingly similar to the owner’s distinctive trademark or, in the case of a famous mark, identical, confusingly similar to, or dilutive of, the owner’s trademark, and (ii) registered or used by that person with a bad faith intent to profit from the owner’s trademark.³

The statute provides that a court may consider the following factors in determining whether a person alleged to have violated the Act has acted in bad faith:

• the trademark or other intellectual property rights of the person, if any, in the domain name;
• the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
• the person’s prior use, if any, of the domain name in connection with a bona fide offering of any goods or services;
• the person’s bona fide non-commercial or fair use of the mark in a website accessible under the domain name;
• the person’s intent to divert consumers from the trademark owner’s on-line location to a site accessible under the domain name that could harm the goodwill represented by the trademark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion, sponsorship, affiliation, or endorsement of the site;
• the person’s offer to transfer, sell, or otherwise assign a domain name to the trademark owner or to any third party for financial gain without having used, or having intended to use, the domain name in a bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct;
• the person’s provision of material and misleading false contact information when applying for the registration of the domain name, the person’s intentional failure to maintain accurate information, or the person’s prior conduct indicating a pattern of providing misleading information;
• the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to trademarks owned by others that are distinctive, or which are dilutive of famous marks of other trademark owners; and
• the extent to which the trademark incorporated in the person’s domain name registration is not distinctive and famous within the meaning of the Lanham Act §43(c)(1).⁴

These factors are not exclusive, and a court may consider any other factors or evidence that it deems relevant to the issue of bad faith. Notwithstanding, the Act does specifically provide that, where a person believed and had reasonable grounds to believe that the use of a domain name was a fair use or otherwise lawful, a court cannot find bad faith intent, and therefore, there can be no violation of the Act.

The Anticybersquatting Act provides the traditional trademark infringement remedies of injunctive relief, the defendant’s profits, actual damages and costs. Additionally, court, in its discretion, may also award statutory damages, over and above the other damages, in an amount ranging from $1,000 to $100,000 for each infringing domain name. The injured party may also recover attorney’s fees, in the court’s discretion.

Of crucial importance, the Anticybersquatting Act can provide the injured party with in rem jurisdiction over the domain name where that party cannot with due diligence obtain personal jurisdiction over the defendant. In rem jurisdiction is no mere legal technicality; it permits the trademark owner to obtain forfeiture, cancellation or transfer of the infringing domain name simply by filing the action against the domain name, as opposed to the cybersquatter itself. In rem jurisdiction is an important time and cost effective mechanism where the cybersquatter is either a “fly-by-night” that cannot be found or a foreign entity. The trademark owner can file a lawsuit against a variety of infringing domain names (whether or not owned by different parties) and, if successful, can obtain an immediate transfer of those domain names from the cybersquatter to the trademark owner. An in rem proceeding can be brought in the judicial district where the domain name register, registry or other domain name authority is located or where documents sufficient to establish control and authority regarding the disposition of the registration are deposited with the court.

In concept, the Anticybersquatting Act offers significant additional protection to trademark owners which did not exist prior to its passing. Whether there will be a practical impact on the practice of cybersquatting will depend on the implementation of the Act by the court, which should begin soon. Trademark owners have taken immediate advantage of the new law. Less than two weeks after the bill was signed into law, three lawsuits were filed under the Act. In California, New Zealand’s “America’s Cup” obtained a temporary injunction under the Anticybersquatting Act, which prevented the defendants who registered the “AmericasCup.com” domain name from using it for a website.⁵ Harvard University filed a suit against two defendants who attempted to auction off a number of domain names containing Harvard marks.⁶ In New York, the National Football League sued an alleged cybersquatter for his registration and use of the domain names “NFLtoday.com”, “NFLtoday.net”, and “NFLtoday.org”.⁷

Despite the use of this Act in recent lawsuits, trademark owners should be aware of several issues that could arise as to the scope of the new law’s protection. To begin with, the law requires that the cybersquatter act with “bad faith intent”. The Act states that a party who has “reasonable grounds to believe” that its use was fair or otherwise lawful does not act in bad faith. This exclusion provides cybersquatters with an opportunity to create a factual issue as to whether it reasonably believed its use was fair or lawful.

Moreover, bad faith intent is not a prerequisite to obtaining injunctive relief for a standard trademark infringement under the Lanham Act. Accordingly, while the Anticybersquatting Act does not provide the trademark owner with a remedy where a person innocently registers a domain name, a traditional trademark case would have a different result. If a person innocently attempts to register with the Patent and Trademark Office a mark  which is identical or confusingly similar to an existing party’s trademark, the existing trademark’s owner can oppose and foreclose the new registration, even though it was made in good faith.

Similarly, an innocent infringement of a trademark can be permanently enjoined under the Lanham Act, and yet, under the Anticybersquatting Act, it appears that a trademark owner, whose mark has been registered as part of a domain name in good faith, cannot bring a successful claim under the Act. Instead, it must wait until the domain name owner actually makes commercial use of the name on the World Wide Web or until there is an attempt by the domain name owner to sell the mark. This waiting period in cases of good faith registration runs contrary to the fundamental trademark law principle that any potential infringing use should be enjoined as soon as possible to avoid irreparably harming the trademark owner.

Notwithstanding potential limitations, the Anticybersquatting Act is a useful tool for trademark owners. It alleviates the burden on a trademark owner’s need to monitor the registration of domain names that contain its trademarks, and, more importantly, gives trademark owners powerful leverage when cybersquatters attempt to lay claim to their marks on the internet and extort large payments from them; a circumstance which is now all too familiar.