Your money or your name
January 19, 2000
by Brett N. Dorny
(IDG) -- Most of the time, finding our way along the information superhighway is easy. We don't even have to ask for directions. If we want information on The Coca Cola Co., we just go to coke.com, and there it is. And if we want information about Disneyworld, it can be found at disney.com.
However, until recently, if we wanted information about Dunkin Donuts and went to dunkindonuts.com, we found nothing. There was some information at dunkindonuts.org, but it was posted by disgruntled customers and employees. Many companies, such as Wendy's and Volkswagen, have found that their well-known trademarks, names and variations of their names have been registered as domain names by someone else, someone who is eager to sell the brand name, for a large sum of money, back to the company that has spent millions of dollars building that brand.
That practice, the registration of someone else's trademark or trade name as a domain name for the purpose of selling it to the appropriate holder, has become known as cybersquatting. It is regarded, by victims, and by most observers, as a pernicious practice, as well as a murky one.
While domain names that mimic a company name are mainly an inconvenience to the Internet users looking for information, they can represent a real threat to the companies whose names are used. Often, those companies have little choice other than paying the cybersquatter's ransom.
Internic, the original company selected to register domain names, started with a first-come first-served policy—the first person who selected a domain name received the name, no questions asked. That practice would have worked fine if every company was Internet-savvy from the start. Unfortunately, many were not. A great many traditional companies were slow to recognize the significance of the Internet and Web as the information vehicle of the future. This left room for others to step in and act first.
Registration of a domain name is cheap and easy. The registrant merely pays a $70 fee and completes a form. As long as the domain name is not already taken by someone else, no other action is needed. The registrant does not even have to use the domain name or produce a Web site.
Those who recognized the value of the Internet realized they could pay the $70 fee and register names to be sold later for tens of thousands, or even hundreds of thousands of dollars. Cybersquatting was born. Some crafty hopefuls even registered as domain names the 800 telephone numbers of large service corporations.
Naturally, complaints about the first-come first-served policy were soon raised, and legal experts started thinking about what might be done to prevent the kind of legal extortion that was flourishing. Since cybersquatting evolved from the use of others' trade names and trademarks, trademark law appeared at first to be the most appropriate mechanism to address the issue. But there was a problem with that reasoning.
Trademarks are protected from the use of similar marks that cause confusion among the public. As long as the use does not cause confusion, different people or companies can use similar or identical trademarks. Often, the cybersquatters do not actually use the domain name. Therefore, there can be no confusion. And even in cases where the names were used, Web site users generally would not believe that the site was owned or operated by the trademark owner, since they relate to different products or services.
The remedy for a trademark law violation is an injunction from committing the confusing use. While preventing a confusing use of a domain name is important, generally the trademark owner wants to become the owner of the domain name. Assignment of a domain name is not an available remedy under trademark law. To get the domain name, the cybersquatter's ransom still has to be paid.
Internic, for its part, did not want to be charged with creating a policy for deciding domain name disputes, so it left the matter to the courts. At the same time, however, in an attempt to limit its own liabilities, Internic instituted a policy of placing on hold any name involving a trademark dispute. Disputed names could not be used until the dispute was resolved. While this move got Internic off the hook, it raised a new problem.
A proper domain name owner was precluded from using its own domain name even if the alleged dispute was baseless. Trademark law is based upon the use of a mark in connection with specific goods and services. It allows different companies to use the same mark with distinct products. However, only one domain name is available. When there are multiple trademark owners there is no process for determining who should get the domain name.
Nevertheless, any trademark owner could assert that a dispute exists which prevents use of the domain name. Also, while some words represent specific products, they can function as a trademark for other items. Apple.com could equally apply to Apple Computer Co. and an apple grower. How does one decide who gets the domain name? A registrant might have as much right to the domain name as a trademark owner. The wait for resolution of a domain name dispute, which may take years, can damage a proper user hoping to use the name he or she has developed.
Since trademark law, which is set by statute, is now understood not to apply to domain names, further government action is necessary to address this new type of property. First, due to complaints about the ways in which Internic was handling the assignment of domain names, the government stepped in and selected a new process. A new entity, the Internet Corporation for Assigned Names and Numbers (ICANN), began assigning names. One of the first things ICANN did was to develop a policy relating to disputes regarding domain name assignments. Congress has also worked on developing a policy for resolving disputes within the courts. Recent bills have been passed to amend trademark law to address domain names. Both ICANN's draft policy and the new bills treat domain name registration in the same way.
Domain names are still to be registered on a first-come-first-served system. Therefore, as between two possible users of a domain name, the first to attempt to register the name will have the rights to it. On the other hand, domain names cannot be held for ransom. A trademark owner can dispute a domain name registration for an identical or confusingly similar name to its mark. However, the trademark owner will only prevail if it can show that the registrant acted in bad faith; in other words, registered the domain name for purposes of extorting big bucks from its more appropriate owner.
Bad faith is shown by offering to sell the name for large sums or by nonuse, or by use not related to a legitimate business or in connection with a confusing business. If the trademark owner prevails, not only is the domain name owner precluded from using it in a confusing manner, as under current trademark law, but the domain name registration is canceled. This allows the trademark owner to register the domain name as the first registration for the now canceled domain name.
Brett N. Dorny is of counsel in the Boston office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC, where he specializes in intellectual property law.
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