The popularity of the Internet has let both brick-and-mortar businesses and Web-based businesses reach more customers with little additional effort. However, at the outset, it was difficult to predict the impact the Internet would have. One result was a flood of domain name registrations by persons seeking to profit from names containing famous trademarks.

This new form of piracy quickly became known as “cybersquatting,” with a cybersquatter being a “person” (defined to include businesses as well as individuals) who registers a domain name, and who is not the rightful owner of this name, with the specific intent to profit from that name by selling it to a third party.

You should, of course, consult an attorney if you have legal questions that relate to domain names or domain name dispute issues; this article is not legal advice. The good news, though, is that you can take steps to keep your domain name safe in your own hands.

Saying STOP to Squatters

Cybersquatting became such a widespread problem that a federal law was passed to address it in 1999. Called the Anti-Cybersquatting Consumer Protection Act, it is commonly referred to as the ACCPA, and it provides for a

federal cause of action against persons who register domain names for profit.

But litigation is expensive, so it’s also important to note that in October 1998, a new organization was formed thatprovides trademark owners with a means of combating cybersquatters without incurring the high costs of litigating. Through this organization, the Internet Corporation of Assigned Names and Numbers (“ICANN”), you can now file arbitration proceedings against cybersquatters.

ICANN’s efficient, quick, and convenient proceedings permit a relatively inexpensive resolution to disputes involving domain names. However, ICAAN does not permit recovery of damages. Its remedies are limited to transfer or termination of the domain name in dispute. If damages are what you’re seeking, then a lawsuit filed under the ACCPA is more appropriate.

Inside the Arbitration Process

ICANN has its own set of procedural rules and regulations, which are relatively simple. Requirements include filing a complaint on a specific form, filing certain fees, and adhering to specific response timelines. Also, a prerequisite to an ICANN proceeding is a demonstration that you have a valid trademark, which is one reason you should register your trademark as early as possible. For purposes of ICANN, and for trademark protection in general, merely applying for registration provides greater protection, and filing is relatively simple but the process is lengthy–approximately one year between the time an application is submitted and registration–and it can be expensive or not, depending upon whether an application is challenged.

ICANN complainants must demonstrate that:

1. The cybersquatter’s domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights;
2. The domain name owner has no rights or legitimate interest in the domain name; and
3. The domain name has been registered and is being used in bad faith.

If a complainant can demonstrate all three elements of an ICANN claim, it is

likely that an ICANN panel will issue a ruling in favor of the trademark owner.

ICANN proceedings do not permit live testimony. They are “pleading based proceedings,” which means that ICANN panels determine the outcome of an arbitration based upon the complaint and answer filed by the respective parties.  It is therefore extremely important that the complaint and answer be carefully drafted.

The Power of the Up-to-Date Internet Audit

Over time, inaction against cybersquatters can diminish the value of your trademark. If you become aware that a cybersquatter is using a domain name containing your trademark and you fail to take action, the cybersquatter could argue fair use or implied consent to use the domain name.

Accordingly, Internet audits (i.e. Web searches) become an extremely important tool to combat cybersquatting, or unauthorized use of your trademark. In addition, if your company has a network of distributors, agents, or franchisees

that are permitted to use your trademark in connection with their businesses, you should first register your domain name and then enter into a license agreement with each distributor, licensee, or franchisee, giving the third party a non-exclusive right to use your trademark in a domain name for the duration of their relationship with you. That way, if your distributor, agent, or franchisee leaves your operation, or you are required to terminate them, you still control the domain name that contains your trademark.
Claude Rich is an attorney practicing franchise, corporate, intellectual property, and distribution law. He can be reached at 3500 Oak Lawn Avenue, Suite 400, Dallas TX 75219, crichlegal@earthlink.net, or 214/523-9558.

Copyright 2003 Claude D. Rich