FRAMINGHAM (04/18/2000) - U.S. Congress has made it official: Those who hoped to make large sums of money by registering internet domain names that intentionally incorporate the trademarks of others are out of business. Yet internet domain names continue to attract a great deal of attention. And no wonder. Despite persistent and generally successful attempts to thwart cybersquatters, names such as www.business.com and www.buy.com are still fetching multimillions in legitimate transactions. The temptation to make a quick buck selling domain names has not waned over time.
Some clear rules were definitely needed. Even in the internet's infancy, legal questions arose: People who realized the value of URLs began registering corporate names for $70 in hopes of selling them back to their trademark owners at an extremely inflated price. Trademark holders had very little recourse against these enterprising cybersquatters.
The courts grappled with the issue of cybersquatting for a few years, and then Congress attempted to deter it altogether through federal law. In November 1999, President Clinton signed the Anticybersquatting Consumer Protection Act (ACPA). It imposes civil liability of up to $100,000 in statutory damages for anyone who, with a bad-faith intent to profit, "registers, traffics in or uses a domain name that is identical to, confusingly similar or dilutive of" an existing trademark or personal name. The Act was very narrowly tailored to apply only to cases in which the domain name registrant acted in bad faith in registering a name belonging to someone else. It therefore will not apply to cases where the registrant is unaware of a trademark status or has registered the domain name for reasons other than a bad-faith intent to profit. Similarly, the Internet Corporation for Assigned Names and Numbers (ICANN) quickly created its Uniform Domain Name Dispute Resolution Policy specifically to address the straightforward bad-faith registration disputes. Seems clear enough, right?
Unfortunately, the attempt at a bright-line rule to clearly and cleanly resolve the cybersquatting issue, while shedding light on cases of obvious bad faith, has cast bigger, more uncertain shadows in other areas. In these shadows lurk disputes that the legislation does not help to avoid or resolve--where factual issues surrounding bad faith are unclear or very similar names are being legitimately used by two valid trademark holders. They are the battles that will continue to be fought at great cost with little guidance.
IN THE SHADOWS The first case brought under the ACPA was filed in December 1999. The dispute involved Harvard University and an individual who allegedly registered over 60 domain names containing "harvard" or "radcliffe," including harvard-lawyers.com and harvard-alumni.com. Harvard alleged in its complaint that the registrant offered the domain names for sale and specifically offered the university first right of refusal to them. If such allegations can be substantiated, the court will likely--by force of the law's clear mandate--transfer the infringing domain names to the university and award it damages and attorneys' fees. (The decision is pending.) But the Harvard case may be the only clear-cut application of the ACPA we see.
In a Christmas Eve 1999 filing, the New York Yankees sued Brian McKiernan, a Queens, New York, resident, under the Act over McKiernan's ownership of newyorkyankees.com. McKiernan claims he registered the domain name with the intent to run a noncommercial fan site, although for two years he failed to establish such a site, he says, because of cease-and-desist letters from the Yankees. McKiernan says he has never offered to sell the domain name to the Yankees; the Yankees say he demanded $25,000 for it. This demonstrates the messy reality of the majority of these disputes, which are going to boil down to the provable, or most believable, set of contradicting facts. Even so, what happens in cases of true nonuse or noncommercial use? Or harder still, what about parody and critical commentary sites operating for no commercial gain? It remains to be seen how the courts will interpret the Act in such gray areas.
SCORE ONE FOR THE LITTLE GUY Even before this legislative weapon existed, the domain name tug-of-war pitted freedom of speech and artistic expression against the rights of trademark holders. Then, as now, it was not always the case that a company holding a trademark could stop others from using it as a domain name.
The courts, and now Congress, have tried to balance the rights of the trademark holder against the threat of so-called reverse domain name piracy--the use of trademark status and a bankroll to bully legitimate uses of the same or similar names. So the courts have not always sided with the trademark holder.
For example, in August 1999 the 9th Circuit held in Avery Dennison v. Sumpton that it would not evict a domain name holder under the Federal Trademark Dilution Act (FTDA) of 1995, where the domain name holder states a legitimate purpose for having the domain name, and the trademark owners cannot show that its mark is "truly famous," or that there is some rational basis for believing the mark will be diluted. Avery Dennison, a multinational label and packaging equipment producer, tried to stop Sumpton, the president of a small company that had registered more than 12,000 surname domains as part of a vanity e-mail concept, from using the domain names www.avery.net and www.dennison.net.
Finding that Sumpton's use would not tarnish or blur Avery's mark, and rejecting Avery's argument that its name was so famous it should be protected from any third-party use of it, the court found in favor of Sumpton, permitting his intended use of Avery and Dennison. This decision suggests that, under a dilution theory, large companies with unique marks, such as Nabisco or Honda, may be protected, but more common (that is, less famous) marks may remain unprotected. Though that may sound unfair, it's consistent with the principles behind dilution that give greater protection to trademarks whose owners have invested extraordinary amounts of time and money to make them successful.
Apparent fame may not guarantee enough protection, however. Hasbro, the well-known toy manufacturer that makes the ubiquitous Clue board game tried to stop a small computer company, Clue Computing, from using the internet domain name www.clue.com. The court found that Clue Computing had a legitimate purpose for registering the domain name, and that although the name of the game "Clue" may be famous, this was not sufficient to enjoin all other uses of such a generic word under the FTDA--there must be some link in the mind of the consumer that would serve to dilute or tarnish the value of the famous mark.
The court found that such a connection did not exist.
The trademark owner lost again in HQM Ltd. & Hatfield Inc. v. Hatfield. In that case, HQM had two registrations for Hatfield in connection with meat products.
The defendant, whose surname was Hatfield, registered hatfield.com in 1995.
Hatfield maintained no website at that address but received e-mail using the domain name. Despite HQM's allegations that the defendant was holding the domain name hostage, the court found that Hatfield was not a cybersquatter--noting that the defendant had not registered more than one domain name, never sold a domain name and had no contact with or connection to the trademark holder. The court therefore rejected HQM's argument that dilution may occur because customers looking for its website might give up if they first found an unrelated or nonexistent website at Hatfield's domain name address.
Without showing actual harm, the court stated, the plaintiff had no claim.
TOY STORY TOO Do cases deciding against trademark owners portend a negative result for the Bronx Bombers? Not necessarily. (Note to self: See if anyone has registered bronxbombers.com.) But with the recent development in the Los Angeles Superior Court involving eToys.com, it appears that the tide against well-known trademark owners in less-than-clear-cut cases has not yet turned.
This time, however, the tide came from a different ocean. eToys, the leading online toy retailer, obtained a preliminary injunction against the much lesser known Etoy.com, which hosts an international art site. Although that marked an early victory for the relatively well-known retailer, we'll never know whether such an injunction--preventing Etoy.com from operating its site--could have been sustained. Citing mass e-mail pressure from an internet-savvy public, eToys announced suddenly that it would drop the suit. Apparently, eToys was bombarded with mail urging it to back off and try to coexist.
Despite the surprising end twist, in the midst of this toy war--as Etoy called it--there were issues of the perceived potential dominance of U.S. commercial law over foreign law, the battle between nonidentical domain names with legitimate preexisting uses and the traditional trademark priority analysis between arguably confusing and competing trademarks. It seems the two domain names had coexisted without incident until an irate consumer complained to eToys and vowed never to use the site again because of purportedly offensive language on the eToys site. The consumer had apparently gone to Etoy.com by mistake and saw the message, "We do not support the old-fashioned [HTML] way...get the f-----g Flash plug-in!" Lo and behold, shortly thereafter, eToys filed suit against Etoy for trademark infringement, dilution and unfair competition. (Side note: For what it's worth, Flash is pretty...cool.) The facts made this a hard case because eToys has had a registered trademark in the United States since May 1997; Etoy filed for its U.S. trademark in June 1997 but asserts that it first used this name in 1994. To further complicate things, Etoy registered its domain name first--on Oct. 13, 1995; eToys registered its domain name on Nov. 3, 1997. Etoy claimed that eToys offered it over $500,000 in cash and stock to purchase the Etoy URL. Etoy refused. Making matters more difficult for eToys, Etoy is the brainchild of a group of performance artists with a social cause (just guess): challenging commercialism, power and control on the internet--not exactly one's first choice for a domain dispute sparring partner. However, eToys had a significant advantage in one important area--with a market capitalization of $841 billion, it could certainly have outspent Etoy in a protracted and inevitably costly litigation. But after the voluntary dismissal, we can only guess how the court would have resolved the issue.
The complexity of this toy case, while perhaps extreme, demonstrates that in the shadows of anticybersquatting legislation exist endless uncertainties that will likely result in very costly domain name disputes for the foreseeable future. But the real story may be how this case got resolved as a direct result of the rising influence of internet culture on corporate behavior. How quickly and effectively such "virtual public opinion" is wielded, with a mere click of a button.
Is legislation the solution? E-mail us about this and other legal topics at firstname.lastname@example.org. Andrew G. McCormick and Laura N. Mankin are attorneys in the eBusiness Group at Thacher Proffitt & Wood in New York City and can be reached at email@example.com.