Problems in cyberspace: trademark protection woes

Here’s a troubling scenario: You’ve registered the perfect domain name for your company and begun to make a name for yourself on the Internet. Then, out of the blue, you get a letter from a lawyer claiming to represent a trademark holder who demands you immediately surrender the domain name — the lifeline of your business. You soon may become a victim of reverse domain name hijacking.

Reverse domain name hijacking occurs when a person or business holding a trademark attempts to use a public or private legal proceeding in bad faith to take away a domain name. While reverse domain name hijacking occurs relatively infrequently, especially when compared to cybersquatting, it can have serious consequences when it happens.

In its infancy, the Internet was largely a lawless and unregulated territory. Savvy individuals seeking quick riches rushed like gold miners to stake their claims to domain names. Some had no intention of legitimately using the domain names. Rather, they wanted to capitalize on the reputation of others by registering domain names that were confusingly similar to famous trademarks.

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Initially, domain name registrars dutifully granted the registrations, which were done on a first-come, first-served basis. Then, the ?cybersquatters? would wait for the holder of the famous trademark to discover the domain name had been taken and then would ransom the domain names back to them at an exorbitant price. The business community was understandably peeved.

Eventually domain name registrars reacted. By late 1998, Network Solutions had adopted a policy of suspending a domain name if the trademark holder could establish it held rights to a registered trademark identical to the domain name. This policy, perhaps unintentionally, turned the tables too far the other way. Trademark holders could deprive a registrant of a domain name even if the name was being used in an entirely separate industry with no likelihood of confusion — the birth of reverse domain name hijacking.

In 1999, Congress passed the Anticybersquatting Consumer Protection Act (ACPA). Under it, the holder of a distinctive or famous trademark can force the transfer of a domain name that’s confusingly similar to or dilutive of its trademark if the name was registered in bad faith. While narrowing the circumstances under which a trademark holder could gain back these domain names, the ACPA provides strong remedies where cybersquatting is found — remedies ranging from $1,000 to $100,000 per domain name plus litigation costs and, in some cases, attorneys’ fees.

In addition, by early 2000, every domain name registrar had adopted the Uniform Dispute Resolution Policy (UDRP) of the Internet Corporation for Assigned Names and Numbers. Every domain name registrant now must agree to abide by the UDRP, which defines an arbitration procedure for domain name disputes.

Like the ACPA the UDRP protects against bad-faith registrations by cybersquatters, although no monetary damages can be awarded. UDRP proceedings are much quicker than lawsuits, often lasting only three months. The problem is, because UDRP proceedings are not binding on courts, they may become merely a prelude to protracted litigation. Thus, the combination of tough remedies under ACPA versus the speed of UDRP proceedings allows trademark holders to pressure domain name registrants — particularly start-up companies and people with minimal financial resources — to transfer domain names due to the potential costs, even if the registrant isn’t technically violating any trademark laws.

There is a counterbalance to reverse domain name hijacking, but it’s relatively limited. If a domain name is cancelled or transferred by a registrar based on misrepresentation, the aggrieved registrant can force the return of the domain name and recover his costs. But the burden of winning such a case is onerous. And the ACPA is of no help when the domain name registrant prevails in the UDRP proceeding, or if the registrant lacks financial resources and makes a settlement. Even if a complainant is found by an UDRP arbitration panel to have engaged in reverse domain name hijacking, the UDRP imposes no penalties.

If there’s a bottom line to all this, it’s that the good intentions of lawmakers and domain name registrars to combat cybersquatting have opened a window for unfair and abusive tactics against legitimate domain name registrants. The ACPA and UDRP create significant incentives for trademark holders to force the transfer of domain names from those who lack the financial resources to fight back.

The practice of reverse domain name hijacking may increase as more trademark holders become aware of the legal remedies provided by the ACPA and UDRP. Small businesses must be wary of this lurking threat. Perhaps in time, courts will strike a comfortable balance between the competing interests of trademark holders and domain name registrants. Until then, those who lack the financial wherewithal to protect their domain names are vulnerable. Lee C. Robinson is an associate in the Boulder office of Hogan & Hartson LLP and a member of the firm’s Litigation Group. Robinson’s practice involves a broad range of commercial and technology litigation matters.