Different Kind of Property Right

New Jersey Law Journal       August 8, 2005

HEADLINE: A Different Kind of Property Right; 
Transactions involving Internet property require special consideration

BYLINE: Jonathan Bick

Bick is counsel to WolfBlock Brach Eichler of Roseland and is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is also the author of 101 Things You Need To Know About Internet Law [Random House 2000].

The law breaks property into two categories: real and personal. If the object of a transaction is found to be personal property, it is subsequently categorized as either tangible or intangible. Although broadly categorized as personal property, Internet property has characteristics of both tangible and intangible property. Consequently, attorneys must take the special nature of Internet property into consideration when attempting to resolve legal difficulties relating to an Internet transaction.

Like intangible property, Internet property cannot be touched or otherwise perceived by a person's ordinary senses. This characteristic has resulted in a consensus in the legal community that Internet property should be protected in a manner similar to intellectual property. For example, trademark law has been applied to protect domain names -- consider the Anti-Cybersquatting Protection Act, in particular.

Like tangible property, Internet property is capable of being possessed without being acquired. When a person is in possession of Internet property, such as an e-mail, that item of Internet property will be protected against everyone except the true owner. Meta tags -- embedded tags that describe various aspects of a Web page -- exemplify this attribute of Internet property.

Internet property includes America Online "keywords," instant messaging screen names, telephony point codes, e-mail and domain names.

Unlike traditional intellectual property, most Internet property rights can be created by a nongovernmental organization. For example, a company's AOL keyword Internet property is a contract right. Some Internet property rights arise from governmental authorization, however, such as the Federal Communications Commission's issuance of telephony point codes.

The government grants copyrights and patents to give authors and inventors incentives to create new products, processes and works of art for the public's benefit. Similarly, trademarks give companies incentive to foster good will and to prevent consumer confusion as to the source of goods. While copyright, trademark and patent rights may be associated with Internet property, they are not required to give rise to the existence of Internet property.

Internet property rights also differ from traditional intellectual property rights in that they are much easier to obtain. Unlike a trademark or patent, no thorough examination process is required. There is no originality requirement as is required for a copyright. Generally, all that is required is knowledge of the registration procedures and the ability to pay the associated fees.

The initial manner of distributing Internet property, as exemplified by domain names, was on a first-come, first-served basis. Subsequently, as the value of Internet property developed, conventional laws have redistributed Internet property rights. For example, as Internet property gained recognition, Internet property began to obstruct trademark rights. Since Internet property -- including keywords, meta tags and domain names -- often serve as symbols representing a particular product, sources of goods and/or people, such conflict was expected.

In Playboy Enters. v. Netscape Communications, 55 F. Supp. 2d 1070 (C.D. Cal. 1999), Netscape used "playboy," a trademark owned by Playboy Enterprises, Inc., as an Internet search term. Playboy sought an injunction to end this advertising practice. The court denied the injunction, finding Playboy failed to establish a likelihood of confusion. Subsequently, the court granted Netscape a summary judgment on those grounds.

The Ninth Circuit reversed, ruling there was a question of material fact as to whether Netscape's advertising practice created a likelihood of "initial interest confusion." Playboy Enters. v. Netscape Communications, 354 F.3d 1020 (9th Cir. 2004). Playboy argued that Internet users searched for the term "playboy" because it was associated with products of Playboy Enterprises. Hence, those using the Internet search benefited from Playboy's good will.

The doctrine of initial interest confusion was established in Brookfield Communications v. West Coast Entertainment, 174 F.3d 1036 (9th Cir. 1999). In Brookfield, the Ninth Circuit found that the use of the plaintiff's trademark, "MovieBuff," in the defendant's Web site meta tags would guide consumers to the defendant's Web site even though they were seeking the plaintiff's products.

While some may argue that a notice disclaiming any relation to a trademarked entity would resolve this potential legal difficulty, others would argue the meta tags are unlawful under the Federal Trademark Dilution Act 15 U.S.C.A. 1125(c), because customer confusion is not required. A showing that the subsequent use of a famous mark causes dilution of the distinctive quality of the mark would suffice.

Consider the nature of the Internet property known as Internet domain names. They spring into existence as a consequence of a registration. They can be purchased and sold, but arguably not owned, because in the hyper-technical sense, they are not susceptible to private ownership (i.e. Res nullius). The registrant's rights are treated like almost every other form of property, except if the registrant had a subjectively unlawful purpose for acquiring it, then the registrant may be forced to transfer it.

Whether a domain name can or cannot be owned is not an issue with respect to Internet commerce, because the registration rights which arise and accrue to the registrant are tantamount to ownership rights. A domain name registrant has a property right in the registration and can exercise property-like control over it. However, such rights are limited and may be eliminated by the owners of certain trademarks.

The nature of a transaction is significant when a party attempts to confiscate the object of a transaction. In particular, some Internet assets have special procedures associated with them. Again, consider domain names. Before 1999, the intangible nature of domain names made confiscation a difficult task, because such Internet property was not susceptible to ownership. However, the process of seizing a domain name became significantly easier with the 1999 revision of the Uniform Domain-Name Dispute-Resolution Policy (UDRP).

All domain name registrants must agree to be bound by UDRP. Thus, each registrant must submit to binding arbitration in cases where any one of the following fact are alleged: (1) a complainant asserts that the domain name is identical or confusingly similar to a mark in which the complainant has rights; (2) the registrant has no rights or legitimate interests in the domain name; and (3) the domain name has been registered and is being used in bad faith.

A complainant brings an action by filling out a pre-existing application form, paying a predetermined fee and mailing the application and fee to one of several authorized arbitration centers. The arbitrator can order the transfer of a domain to a successful complainant.

It should be noted that for the purpose of domain names, the aforementioned remedy is only possible because the United States government has been able to maintain a measure of control over the systems which are integral to the Internet. The registration of domain names is for all intents and purposes controlled by two entities, Network Solutions, Inc. (NSI) and the Internet Corporation for Assigned Names and Numbers (ICANN). These groups received their monopolies over the domain name registration scheme by contracting with the U.S. Department of Commerce.