Back to Legal Matters Main Page


Home Page

 

 






Domain Names - Online Storefronts: 
Carreon On Cybersquatting, Hijacking & Domain Basics

By Charles Carreon
Attorney/Author

There is a widespread belief that domain names make good investments.  Certainly many a domain has proved its value as a traffic and revenue magnet.  But on the whole, domain name investment is highly speculative, and can simply prove a desert of evaporating dreams as registration fees mount up and revenues never materialize.  Those who know how to monetize domain names know how they do it, and don't need advice from me on that aspect of their business.



 

So let's talk about your average online business owner, for whom a domain name is a business tool. It is cyber real estate, an electronic storefront, a roadside billboard and yellow pages ad, all rolled into one. Rather than having wide investment value as properties that anyone can put to work, they have specific value for each individual business owner. It was evident from the early days of "cybersquatting," that most cybersquatters had no idea what to do with valuable domain names like "PaineWebber.com," except to offer to sell it to the Paine Webber brokerage house. Please note that Paine Webber recently lost its identity in a merger, and PaineWebber.com now redirects after a few seconds to "UBSPaineWebber.com."

I'd like to tell you that you can obtain an insurance policy for your valuable domain names. As a practical matter, if you have theft insurance, you should list your domain names among your possessions; however, I don't know of any cases that have litigated an insurance claim by a domain name owner under a personal property policy. Inevitably, such a case will arise, and insurance companies will get around to insuring domain names. For the moment, I don't know of a carrier to refer you to who would sell you an insurance policy for your valuable domain names.

THE ACPA -- A CYBER-LANDLORD EVICTION LAW

That leaves us with the current state of the law, which is controlled by the Anti-Cybersquatting Consumer Protection Act ("ACPA"), a powerful statute that Congress grafted onto the Lanham Act that gives trademark owners the power to obtain injunctions, seizure orders, damages and attorney's fees against trademark counterfeiters. Cybersquatting, Congress apparently concluded, was another form of trademark counterfeiting -- the theft of a name for the purposes of redirecting business to the wrongful owner. You can check the law out in the Legal Links.

Lawyers immediately discovered the value of the ACPA. A February, 2001 National Law Journal article entitled "Cybersquatter Litigation Boom," told lawyers right where they would find the money:

"The Anti-cybersquatting Consumer Protection Act, effective in 1999, has spawned a litigation explosion. More than 700 lawsuits seeking injunctions or damages against suspected cybersquatters were filed in federal courts across the country in just the last six months. Appellate decisions interpreting the new act have also begun to mount. The ACPA helps trademark owners sue those who have registered like-sounding Internet domain names by easing jurisdictional requirements and expediting the litigation timetable. Statutory damages of up to $100,000 may be obtained where personal jurisdiction is established and the domain name was registered in bad faith."

The ACPA is the equivalent of an eviction law for cyber landlords. In other words, it's a handy tool for a plaintiff, and a serious problem for a defendant. The first thing you want to avoid, unless you are one of the seven million people currently residing in the State of Virginia, is being sued there. And that could happen quite easily if a well-heeled corporate plaintiff decided to file an ACPA lawsuit to repossess one of your domain names and invoke the "in rem" provisions of law, which permit an ACPA plaintiff to file "in the judicial district in which the domain name registry is located." There is only one "registry," Verisign in Herndon, Virginia, so a lot of ACPA cases get filed in the Eastern District of Virginia, one of the most conservative and industry-friendly jurisdictions in the United States. Not a place where an average Joe generally finds it easy to retain counsel. You can avoid this whole problem by a simple expedient -- keeping your registration information complete and up-to-date, because plaintiffs can only use the "in rem" option if they are unable to communicate with you using the contact information on the registration. After contacting the defendant, an ACPA plaintiff must also exercise "due diligence" to actually serve them with the lawsuit before they can file an "in rem" action directly against the domain name itself in the Eastern District of Virginia.

Regardless of where you are sued under the ACPA, it can be a difficult case to defend. Take the experience of John Zuccarini. He got sued by the registrant of "JoeCartoon.com" for cybersquatting using names like JoesCartoon.com and other similar names. According to an article in the June, 2001 issue of Business Week, Zuccarini lost bigtime.

"The case was originally filed back in January, 2000, by Joseph Shields [against] John Zuccarini who had registered a bunch of domain names similar to JoeCartoon.com like JoesCartoon.com, JoeCarton.com and CartoonJoe.com. Anyone entering into one of those variations was mousetrapped into a series of click-thru advertisements, which Zuccarini has paid as much as $.25 per click. That may not seem like a lot of money, but Zuccarini had about 3,000 sites and earned between $800,000 and $1,000,000 annually, much of it from typo-squatting. *** [T]he court agreed that the ACPA covered the situation perfectly, and in addition to ordering a permanent injunction against Zuccarini's use of the names, hammered him with a fine of $10,000 per domain name along with an additional $40,000 to pay for Shields' attorney fees."

Strictly speaking, in order to prevail in an ACPA action, the plaintiff should have to show what was clearly the case with Zuccarini -- that the names were registered in "bad faith" in order to take advantage of traffic that would otherwise be directed to the plaintiff's site. If the case were tried before a jury, the results of applying a "bad faith test" would be all over the map. But in the short term, during the months and years between the filing of an ACPA lawsuit and trial, a judge will decide who gets to use the domain name. This is because most hardball ACPA lawyers file a "motion for preliminary injunction" that the judge can grant if the plaintiff is "likely to prevail on the merits at trial." Experience thus far has shown that judges tend to be very protective of established corporate interests asserting rights to domain names.

DOMAIN NAME HIJACKING

Another problem, arising from the strategies of scam-artists, rather than the machinations of corporate lawyers, is straight-out domain name hijacking. This occurs when you have a domain name that is valuable in and of itself, like Sex.com, and someone uses a deceptive device, such as a forged letter, to take over control of the registration. Not precisely actionable as cybersquatting, such a claim may be redressed under a variety of common law claims and under the federal action for declaratory relief. These lawsuits are recognized in the United States, but if your domain name is stolen and re-registered to a registrar in a foreign jurisdiction, there may be other, perhaps insurmountable problems, to recovering that domain name. The law in this area is barely formed. Not until November 27, 2000, was a domain name held to be a form of personal property in California. The influential Eastern District of Virginia has ultimately followed suit in recent decisions, and whether a domain name is property no longer seems to be in doubt. Suffice it to say that a valuable domain name, once jacked, stimulates an immediate need for court action to recover it. In these circumstances, please arrange a consultation immediately.

DOMAIN NAME FAQs

What is the UDRP, the Uniform Dispute Resolution Procedure? The UDRP is tucked away in your registration agreement, and will in virtually all cases require you to arbitrate any dispute you have with a domain name registrar through the UDRP. UDRP is also an available form to adjudicate cybersquatting claims, but since any UDRP decision can be basically "appealed" by an ACPA action, most lawyers are not interested in pursuing them. On the other hand, many people have used the UDRP system, and it can be faster and less costly than an ACPA suit. See the Legal Links to find out how to file or respond to a UDRP complaint online with the World Intellectual Property Organization ("WIPO").

How do you buy or sell domain names? Much like any other form of property. A simple form for the purchase or sale of domain names is provided in the Legal Documents. It is not necessarily suitable for all circumstances, and if you are purchasing a really valuable domain name, or at any rate paying a high price for it, please arrange a consultation to plan the transaction.

Are domain names a good investment? Don't waste any money paying domain name registration fees on a name like Pepsistyle.com or TommyHillfinger.com. These worn-out cybersquatting plays will harvest you nothing but trouble. They are an investment in liability, so forget about them. Aside from high-traffic adult names, domain names don't seem to have much more value than discarded department store signs. The magical view that a name alone would bring the world to your door has evaporated, as has the high-tech money bubble that fed the frenzy in domain registrations. What tulips were to the tulip-buying craze that swept Holland in the early 1600's, domain names were at the turn of the millennium. Those days are gone.

How should I get a domain name for my online business? Do what most reasonable business people do when selecting a name for a business -- pick a reasonably unique name, and register it as a trademark with the United States Patent and Trademark Office (the "USPTO"). What does trademarking accomplish? Well, it makes you the landlord under the ACPA. As a practical matter, a trademark will trump anyone else's assertion of prior use. No one can gauge future results, but as far as the courts have gone at this time, that is a pretty safe statement.

*****

This excerpt from Charles' Primer of Online Media Law published with permission of the author, Charles Carreon, Online Media Law, PLLC Copyright 2002, 2004.  To read further from the Primer, visit www.mediaesq.com.



Return to Legal Matters Main Page   -   Go to Home Page  



Copyright 2003
Domain Name Journal
A Division of
Internet Edge, Inc.

Hit Counter