December 2, 2002

Copyright 2002 NLP IP Company - American Lawyer Media

HEADLINE: An ADR Remedy for Cyber-Squatting

Uniform Domain Name Dispute Resolution Policy should be used in lieu of litigation to secure domain names for trademark holders

BYLINE: By Jonathan Bick The author is counsel to Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone 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 Internet Corporation for Assigned Names and Numbers [ICANN] has devised a quick and relatively low-cost method for resolving one of the most common Internet legal difficulties: disputes between trademark owners and domain name registrants.

The Uniform Domain Name Dispute Resolution Policy [UDRP] allows trademark owners to briskly assert control over domain names that are related to their marks, and to expel abuse domain registrants known as "cyber-squatters."

Most United States trademark holders who face cyber-squatting use UDRP rather than litigation to enforce their legal rights - and with good reason. Of the thousands of Internet domain name decisions UDRP has issued from its January 2000 implementation through November 2002, 80 percent have been favorable outcomes for trademark holders. While the loser may appeal outcomes in court, most appeals are rejected. [See http://arbiter.wipo.int/domains/statistics/results.html for details.] UDRP has been adopted by all accredited domain-name registrars for domain names ending in .com, .net, and .org. It has also been adopted by certain managers of country-code top-level domains [for example, .nu, .tv, .ws]. It applies between the registrar [or other registration authority in the case of a country-code top-level domain] and its customer [the domain-name holder or registrant].

Under the policy, disputes alleged to arise from abusive registrations of domain names [for example, cyber-squatting] have been addressed by expedited administrative proceedings that the holder of trademark rights initiates by filing a complaint with an approved dispute-resolution service provider. A trademark owner faced with abusive registration should submit a complaint to an approved dispute-resolution service provider.

All proceedings in these arbitrations are conducted online. The online format is feasible because the subject matter is limited and requires only documentary proof. In particular, ICANN states that UDRP arbitration need only consider three questions: [1] is the domain name in question identical to a registered trademark? [2] does a legitimate interest exist for the domain name? [3] was bad faith on the part of the respondent present when the domain name was registered? Thus, UDRP proceedings are limited to cases of cyber-squatting or related domain name activities. UDRP is not appropriate for dealing with more complex issues.

The adoption of UDRP addresses the public-policy concern that domain names could devalue trademarks. Rather than accepting the declining importance of trademarks, limiting legal protection to situations where competitors try to use domain name marks to confuse consumers, and abandoning the notion of dilution as protection of goodwill, UDRP was implemented to protect existing trademark rights.

UDRP has set a precedent under which a domain name registered in bad faith reverts to the trademark owner. Bad faith has been found when a domain name was registered for the purpose of selling it to the brand owner for a profit. It has also been found when a domain name was used to the detriment of a trademark owner's business, such as porn sites.

UDRP has also been useful for domain owners who have trademark rights and are subject to cyber-seizing [i.e. the registration of recently expired domain names]. Examples of seized names include names like Cuisine, JRC and the Ohio State Senate. Failure to promptly renew a name may result in customers being pointed to e-pornography, which in turn may reflect unfavorably on the prior domain name registrant.

Since cyber-seizers are engaged in buying domain names which have residual traffic due in part to a trademark tie-in, UDRP has been successfully applied. This is true despite the fact that the previous owner of the domain names had not sought to renew them or allowed the domain name registration to lapse due to administrative error or negligence.

A domain name is a user's assumed name for an Internet address. An Internet address is composed of a string of numbers. To better enable Internet users to easily find addresses on the Internet, entities typically selected domain names containing a string of letters associated with their name, brand or trademark. In order to be used, a domain name must be registered at a registrar authorized by ICANN [see www.ICANN.org].

As the Internet developed, the mechanism enabling Internet users to find each another improved. Internet uses changed from Internet protocols [IPs] searches to using domain names. Instead of Internet users searching for unique 32 bit IP number, unique domain names, such as www.BickLaw.com, serve as Internet addresses that allow individuals to consistently identify and locate material on the Internet.

A domain name consists of two components: a top-level domain and a secondary-level domain. The top-level domain is the suffix of the domain name. For example, commercial users typically obtain the .com top-level domain. The secondary-level domain is the unique portion of the domain name and can consist of combinations of letters, numbers and some symbols. Thus, for BickLaw.com, the unique top-level domain is .com and the secondary-level is BickLaw.

The registration of a domain name is a simple and inexpensive process. For a diminutive fee, any one of several domain name registration authorities will register a domain name on a first-come, first-served basis without investigating whether the domain name is related to an existing trademark. However, if a complaint is filed against a domain name owner, the owner is required to submit to these proceedings under the terms of its domain name registration agreement.

As the use of domain names grew, so did the value of certain domain names, especially those corresponding to valuable trademarks. Despite the existence of ICANN, the U.S. government still controls the domain name system, upon which the functions of the Internet are based.

In particular, the domain name system is based upon a root file of computer data stored in Herndon, Virginia. This root file or root zone file is the authoritative list of top-level domain names. For each name, it gives the Internet address of the computer that has the authoritative list of who has registered domain names in that top-level domain. The data is authoritative because it is the file from which the legacy root name servers get their data. These are the servers from which every other computer on the Internet gets their data.

Currently, Network Solutions, Inc. has explicit control of the root files through a contract with the U.S. Department of Commerce. With this contract, the government controls the root files that determine which top-level domain names are available to the Internet community.

The UDRP provides an administrative proceeding for the resolution of domain name disputes. UDRP contains provisions that specify how a party demonstrates his or her legitimate interest in a domain name; initiates a proceeding; appoints an arbitrator; consolidates multiple disputes; determines fees; involves a registrar in the administrative proceedings; details legal remedies; dictates notification and publication of the panel's decisions; and makes available related court proceedings.

An UDRP proceeding is initiated when a trademark owner files a complaint with the National Arbitration Foundation [NAF], the CPR Institute for Dispute Resolution [CPR], the Asian Domain Name Dispute Resolution Centre [ADNRC] or the World Intellectual Property Organization [WIPO]. A fee which is paid by the complainant is also required to initiate an UDRP proceeding. The complainant's only available remedies are the cancellation or transfer of the domain name registration.

UDRP-related rules describe information that must be included in the complaint. This includes the complainant's and the respondent's addresses, the domain name which is the subject of the complaint, the registrar with which it is registered, trade or service mark on which the complaint is based, the grounds of the complaint and the legal remedy sought.

Complainants and respondents may alternatively choose to settle their disputes by mutual agreement, arbitration, or through court proceedings. UDRP requires that most trademark-based domain name disputes be resolved by one of these methods before a registrar will cancel, suspend, or transfer a domain name.

Typically, UDRP proceedings involving a single domain name and cost about $1,000 in administrative fees to resolve. Legal fees are, in the main, limited to those required to prepare and submit a complaint or response. Submissions are made via e-mail and the process is designed to take about two months.

Under UDRP, domain name owners are required to submit to mandatory administrative proceedings if a third party makes all three claims. First, that domain name is confusingly similar to its trademark or service mark. Second, the domain name owner has legitimate interests in the domain name. Third, the domain name was registered and is being used in bad faith.

In order to establish bad faith, any of the following conditions may be shown to exist. First, the domain name registrant requests financial compensation in an amount exceeding the costs of domain name registration. Second, the registration was performed with the purpose of preventing the trademark owner from registering the trademark as its domain name, provided that the registrant has engaged in a pattern of such conduct. Third, the domain name is registered with the purpose of disrupting the business of a competitor. Fourth, the domain name is used for attracting users through the Internet, thus creating confusion.

The complainant is required to prove that each of these elements is present in order to prevail. Respondents can demonstrate their legitimate interests by providing contrary evidence. Typically, such evidence includes a demonstration that the domain corresponds to a legitimate offering of goods and services; that the domain name owner has common law rights to the domain name; and/or a legitimate noncommercial or fair use of the domain name exists. In the last instance, a respondent also shows that he or she had no intent for commercial gain to misleadingly divert consumers or tarnish the complainant's trademark or service mark.

The introduction of an UDRP proceeding does not prevent either party from filing a lawsuit. Such litigation may be filed in a court of mutual jurisdiction before, during, or after the administrative proceeding. The UDRP defines a court of mutual jurisdiction as a court in either the jurisdiction in which the main office of the registrar is located, or the jurisdiction in which the domain name owner resides according to the registration of the domain name in the registrar's database at the time the complaint is filed.

If a UDRP administrative panel orders a domain name to be transferred or canceled, the owner is given ten business days to provide official documentation indicating that he or she has filed a lawsuit. If the panel fails to receive information that a lawsuit was filed within ten days, the decision will be implemented. If documentation of the lawsuit is received within the 10-day period, no further action will be taken until one of three events occurs. These events are: the receipt of satisfactory evidence of a resolution; the lawsuit is dismissed or withdrawn; or, the court dismisses the lawsuit or orders the owner to cease using the domain name.

Recent court decisions have confirmed UDRP's validity and have determined that courts have the authority to review UDRP decisions. In Bord v. Banco De Chile, 205 F. Supp. 2d 521 [2002], an individual registered the domain name bancochile.com. A UDRP outcome resulted in the finding that the registration infringed upon Banco De Chile's trademark rights and an order of transfer of the domain name to the bank. Bord sued to enjoin the continued use of UDRP, claiming it violated the Due Process Clause of the Fifth Amendment, the delegation doctrine, and the Administrative Dispute Resolution Act. case. The court dismissed Bord's suit.

In Weber-Stephen Products Co. v. Armitage Hardware and Building Supply, Inc., [2000 U.S. Dist. LEXIS 6335; 54 U.S.P.Q.2D [BNA] 1766 May 3, 2000], the U.S. District Court for the Northern District of Illinois held that neither the UDRP nor its governing rules dictate what weight courts should give to a panel's decision.

Weber-Stephen is consistent with Parisi v. Netlearning, Inc., 139 F. Supp. 2d 745 [E.D. Va. 2001], which also confirmed the validity of UDRP, and supports the determination that a WIPO ruling is not binding on a district court reviewing such a case.

Similarly, in Virtuality L.L.C. v. Bata Ltd., [138 F. Supp. 2d 677, 684 [D. Md. 2001]], the defendant unsuccessfully moved to dismiss a plaintiff's complaint, which was filed as a result of an Internet domain name dispute between the parties and previous submission of the dispute to an arbitrator for the UDRP.