The Anticybersquatting Consumer Protection Act: two cases addressing cybersquatting before and after the act.

• Author: Fisher, Bruce D.

"You're a cybersquatter, and, as such, are infringing and diluting my trademark," said John Smith, of Intermatic Corporation, which owned the valid trademark "Intermatic." John was talking to Mr. Toeppen, who had paid $100 to have the name "intermatic" registered as an Internet domain name.

"No, I'm not. Nothing I've done is illegal under the federal trademark laws," replied Toeppen. "I registered the domain name `intermatic' first, and because only one person may register a domain name on the Internet, I have the right to use the domain name `intermatic' even though you have registered it as a trademark. However, I would consider selling or licensing the domain name `intermatic' to you."

Who has superior rights to the "intermatic.com'" domain name?

"Let's sue the trademark owner of `sporty's' and get a court determination that we own the domain name registration rights to `sportys.com'," said the CEO of Sporty's Farm. "After all, we were first to register `sportys.com.' Also, the Anticybersquatting Consumer Protection Act does not apply to us because our registration of the domain name took place prior to the Act's passage."

Is this correct?

As the commercial sector of the economy embraces the Internet, businesses are coming to realize the importance of trademarks as domain name identifiers -- Internet addresses -- which can direct prospective customers to the correct website where a business' wares or services can be viewed. Simply put, many consumers assume that businesses' trademarks such as "disney" are the Internet addresses of their trademark owners. Unfortunately for many businesses, this is not the case given the advent of "cybersquatting."

The above scenarios present "cybersquatting" incidents, involving competing claims for the right to a unique Internet domain name between a valid trademark holder versus a first in time registrant (the "cybersquatter") of that mark or a similar mark as an Internet domain name, often coupled with the squatter's attempt to traffic in the domain name by selling or licensing it to the trademark owner or a third party.[1]

There have been a number of cases[2] both prior and subsequent to passage of the Anticybersquatting Consumer Protection Act (hereinafter "act")[3] on November 29, 1999. Generally, the courts have sided with the prior valid trademark registrant[4] and allowed this party to prevail with respect to the right to register the identical or similar name as an Internet domain name even though someone else (a "cybersquatter") was first in time to register the name as an Internet domain name. Nonetheless, there have been concerns expressed about protecting persons who are first registrants of domain names which coincidentally bear a resemblance to or are identical to someone else's trademark.

The act deals with the general topic of "cyberpiracy," a term which given the act's coverage embraces both competing domain name claimants between trademark holders and first in time registrants of the other's trademark (generally referred to as "cybersquatting") as well as first in time domain name registrants of another individual's name to whom it is offered for financial gain.[5] This article first examines some of the abuses leading to passage of the act, discusses principal provisions of the act dealing with cyberpiracy, and finally turns to an examination of two cases showing cybersquatting problems as noted at the outset of this article, one involving a cybersquatting matter in which the court did not rely on the ACPA to dispose of the case, while the other case flows from a recent U.S. Second Circuit Court of Appeals decision applying the new act.

Some Incidents Leading to Passage of Act

Hearings before both the Senate and House committees that considered the act reveal a number of activities involving Internet domain name registrations that could charitably be called "opportunistic" and critically termed "piracy." For example, it was revealed that when Exxon and Mobil announced their proposed merger in December 1998, a domain name speculator registered"every variation of the possible resulting domain name, i.e., mobil-exxon.com, exxon-mobil.com, mobil exxon, com, etc., ad infinitum."[6] Further, a London-based computer club in May 1999 registered over 75,000 domain names using an automated computer program. Their apparent goal was to gain control of all available four letter domains by systematically reserving every possible combination of letters, starting with aaaa.com, then aaab.com up to zzzz.com so no one else could obtain these domains unless they purchased them from the group.[7]

In addition to cornering the market in domain names, government reports revealed other serious domain name abuses. Some cybersquatters were seen to target trademarked brand names in order to extract high fees from trademark holders desiring to use their own names in Internet commerce. In this respect, it is quite common for a brand name such as "cocacola" to want to use it as its Internet url (address) because persons trying to locate "cocacola" intuitively use such trademarked names as a first attempt to locate the company's web page. Given the move to the Internet by traditional "bricks and mortar" companies in order to transform themselves into "clicks and mortar" firms with enhanced longevity,[8] the need for consumer-friendly intuitive access to the Internet is a must for businesses. Traditional "bricks and mortar" firms have admittedly been a bit slow in adapting to the Internet and often find their trademarked names or corruptions thereof pre-empted by cybersquatters who are willing to part with big firms' trademarks for a "pretty penny." In one instance a small Canadian company with one shareholder and a couple of dozen domain names demanded that Umbro International, Inc., which markets and distributes soccer equipment, pay $50,000 to the one shareholder, $50,000 to an Internet charity, and provide a free lifetime supply of soccer equipment in exchange for the "umbro.com" domain name.[9]

Warehousing of domain names has become common. This involves registering a large number of domain names and offering them to the highest bidder. There was evidence before the Senate Judiciary Committee of one cybersquatter (not an owner of any of the trademarks registered as domains) whose partial inventory of domain names included Coca-Cola, Pepsi, Burger King, KFC, McDonald's, Subway, Taco Bell, Wendy's, BMW, Chrysler, Dodge, General Motors, Honda, Hyundai, Jaguar, Mazda, Mercedes, Nissan, Porsche, Rolls-Royce, Saab, Saturn, Toyota, and Volvo.[10] These domain names were offered to the highest bidder online. Again, the fact that a cybersquatter was able to preempt trademark owners from registering their own trademark as a domain reflects the slowness of "bricks and mortar" firms in responding to the Internet phenomenon.

Some cybersquatters simply seek to engage in a type of unfair competition by registering a famous trademark and then directing business to the cybersquatter by creating the erroneous consumer impression that the famous mark is in some way associated with or endorsing the cybersquatter's business.[11] In one case cited by the Senate Judiciary Committee the domain name "disneytransportation.com" greeted online consumers with pictures of Mickey Mouse and offers of Orlando, Florida, shuttle service and Disney hotel reservations even though it was in no way associated with the Walt Disney Company.[12]

Perhaps the most pernicious form of cybersquatting involves use of pornography. There are variants on the techniques used here. For example, a cybersquatter can register a famous mark, place pornographic materials at the site, and then offer to sell the domain name to the highest bidder, where presumably the mark owner would be most interested in seeing that its mark was not associated with lewd material. In one case a cybersquatter placed pornographic pictures of celebrities on a site using the domain name "pentium3.com" and offered the site to the highest bidder.[13] Also, pornography can play a part in corruptions of famous marks such as "dosney.com" instead of"disney, com" based on human propensity to strike the wrong key on a keyboard. By adding pornography on the corrupted site where revenue for the site is based on the number of"hits," the valid mark is tarnished.

The aforementioned machinations of cybersquatters were all cited by congressional authorities as reasons for regulating cybersquatters.

Principal Provisions of Act

Given the aforementioned concerns leading to passage of the act, attention turns to a consideration of the act and its major provisions. The act[14] is a small part of an appropriations measure enacted by Congress in late 1999. The act amends the Trademark Act of 1946 by adding a new subsection d.[15] As the act's name suggests, it casts an unfavorable eye on cybersquatters. It does so by allowing a federal trademark holder to sue persons who, with "bad faith intent" to profit from the mark, registers, trafficks in, or uses a domain name that, in the case of a distinctive mark at the time of the domain name registration, is identical or confusingly similar to the mark.[16] The act defines domain name[17] and...