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Statutory Remedies for UDRP Grievants

Gerald M. Levine

The U.S. is unusual in that grievants of a UDRP award have a statutory remedy from an adverse UDRP award, namely an action for declaratory judgement under the Anticybersquatting Consumer Protection Act (ACPA). The action is not an appeal, but a de novo assessment of the parties' rights, either that the domain name holder is cybersquatting or its registration was lawful. Under U.S. law UDRP awards are not treated as arbitration awards subject to the Federal Arbitration Act but as new disputes.

Why should this be unusual, though? Doesn't the UDRP expressly provide in paragraph 4(k) that the administrative procedure is nonexclusive? Of course it does, but the right is rather aspirational than sealed by legislative edict. What makes the ACPA unusual and unique is that Congress adopted the concept of paragraph 4(k) by legislating subject matter jurisdiction equally for whomever the grievant may be. It favors neither party. The statute is symmetrical in every respect, down to awarding damages and attorneys' fees to the prevailing party (except in an in rem action against a domain name, as discussed further below).

Read literally, paragraph 4(k) (Availability of Court Proceedings) seems to say that a losing party is not foreclosed from having the dispute independently resolved by a court of competent jurisdiction. It reads:

The mandatory administrative proceeding requirements set forth in Paragraph 4 shall not prevent either you or the complainant from submitting the dispute to a court of competent jurisdiction for independent resolution before such mandatory administrative proceeding is commenced or after such proceeding is concluded.

However, the U.K. and Australia have no statutes comparable to the ACPA and no legislatively created subject matter jurisdiction for grievants. If there is no subject matter jurisdiction there is no right to maintain a legal action unless the court says there is, but if the court did that it would be judge-created law, which is something that happens all the time in common law jurisdictions as courts construe statutory law.

Because paragraph 4(k) is not self-activating, its benefits are not universally available. In a 2015 case in the U.K., Yoyo.email v. Royal Bank of Scotland Group, PLC, the High Court of Justice, Chancery Division ruled that the court lacked subject matter jurisdiction to consider an original claim from an alleged erroneous UDRP award — "a proper construction of the UDRP clause 4k does not give rise to a separate cause of action in favour of the claimant." The court in Yoyo.email found a precedent in an earlier decision from the High Court, Toth v. Emirates and Nominet involving an award from a Nominet Panel (for the country code dot uk).

The Toth decision is not particularly surprising because the Nominet Dispute Resolution Service Policy (the administrator of dot uk) contains an appeal procedure, so the court's ruling that there was "[n]o room for parallel (or consecutive) court proceedings" made sense in that the grievant had already exhausted its remedies. In extending the Toth ruling to UDRP awards, in essence finding that claims are barred under the doctrine of res judicata. domain name holders have nowhere to go either; for them too the award is the end of the line.

The Australian situation is not altogether clear. My very distinguished correspondent-attorney in Australia unearthed a single case, Global Access Limited v. EducationDynamics, LLC., & Anor, 2009], QSC 373 that would have allowed plaintiff (a foreign entity) to proceed with a declaratory judgment action to prevent transfer of to the trademark owner, but the allowance was subject to plaintiff posting a security bond for defendant's legal fees (a clear indication of what the court thought of the claim!). It appears that the magnitude of the security bond (and perhaps plaintiff's realization that it could not prevail where the trademark ELEARNER and ELEARNER.COM had years of priority in the marketplace) was enough to discourage plaintiff from pursuing the action. As a footnote, since the defendant owned a U.S. trademark plaintiff (even though a foreign entity) would have had subject matter jurisdiction under the ACPA.

Before parties rush off to the ACPA as grievants from a UDRP award (which incidentally parties rarely do, but there are some notable examples!) I should point out that by design the ACPA discourages unthought out and possibly meritless claims by imposing financial consequences. The risk in filing a complaint under the ACPA is that the prevailing party is entitled to damages up to $100,000 (discretionary with the court) and attorney's fees (two sets, its own and the other party's). In its recent decision on a copyright case in which attorneys' fees are discretionary, the Supreme Court noted that "[f]ee awards are a double-edged sword: They increase the reward for a victory — but also enhance the penalty for a defeat." Kirtsaeng v. John Wiley & Sons, Inc. (June 16, 2016).

With that in mind, here are a few examples to flesh out the cost results for parties on both sides of the caption. On the top half of the caption (trademark owners lose), Respondent in Austen Pain Associates v. Jeffrey Reberry, FA131200 1536356 (Forum March 18, 2014) commenced an ACPA action following an adverse award and in a consent judgment trademark owner capitulated and agreed to pay plaintiff $25,000. Hugedomains.com, LLC. v. Wills, 14-cv-00946 (D. Colorado July 21, 2015). Respondent in SDT International SA-NV v. Telepathy, Inc., D2014-1870 (WIPO January 13, 2015) removed the dispute to federal court pursuant to paragraph 4(k) and in a consent judgment trademark owner capitulated and agreed to pay Plaintiff $50,000 together with a permanent injunction.

On the bottom half of the caption (trademark owners win), Donald Trump prevailed in a UDRP proceeding and was later the prevailing party in district court in which he was awarded $32,000, affirmed by the 2nd Circuit (April 2016). In past ACPA actions, domain name holders as plaintiffs have been found liable for cybersquatting and ordered to pay damages of $100,000 plus attorney's fees. Lahoti v. Vericheck, C06-1132JLR (WDWA, 2007), aff'd 586 F.3d 1190 (9th Cir. 2009), UDRP decision reported at Vericheck, Inc. v. Admin Manager, FA0606000734799 (Nat. Arb. Forum August 2, 2006).

More recently after losing <windcreek.com> in a UDRP proceeding Virtual Point, Inc. sued the Forum and the trademark owner to prevent its transfer and for damages. In a decision dated June 6, 2016, the court dismissed the action against the Forum on the grounds of arbitrary immunity. Virtual Point, Inc. v. Poarch Band of Creek Indians and National Arbitration Forum, Inc., CV 15-02025 (CD CA, Southern Division). The Poarch Band of Creek Indians has yet to move on the ACPA claim, but when it does the financial consequences will not be insubstantial should it prevail.

Trademark owners who prevail in UDRP proceedings can lose in ACPA actions. Tecnologia Bancaria S.A. v. Marchex Sales Inc., D2014-0834 (WIPO September 24, 2014) (<banco24 horas.com> and ) (over a vigorous dissent) and Marchex Sales Inc. v. Tecnologia Bancaria S.A., 14-cv-01306 (E.D. VA, Alexandria Division June 15, 2015). If defendant defaults (as Tecnologia Bancaria did in this case), plaintiff's remedy is limited to declaratory and injunctive relief, but not damages or attorney's fees.

The reason for this is that in agreeing to a mutual jurisdiction foreign trademark owners have not agreed in personam jurisdiction. To construe the UDRP as "subject[ing] a party to anything more than a challenge to the panel's decision would be unfair and would be inconsistent with the due process clause of the U.S. Constitution." Marchex, Magistrate Judge's Proposed Findings of Fact and Recommendations, May 21, 2015. The remedial limitations for in rem actions are specified in §1125(E)(2)(D)(i) (and would apply equally to domain name holders).

Given the financial consequences of an ACPA action parties should act cautiously. Trademark owners whose rights postdate registration of the domain name or own weak trademarks are the most vulnerable (assuming they appear when challenged). Under the first head, they would lack subject matter jurisdiction therefore potentially, objectively willful in maintaining the action. ACPA §1117(e). Under the second head, they can be found to have overreached their rights and be liable for reverse domain name hijacking. Under both heads, claims would have a higher chance of success if there were also proof of trademark infringement.

By Gerald M. Levine, Intellectual Property, Arbitrator/Mediator at Levine Samuel LLP Information about the firm can be found on the Firm’s website at iplegalcorner.com. Mr. Levine has a litigation and counseling practice representing clients in Intellectual Property rights and management, Internet and Cyberspace issues, domain names and cybersquatting.
Related topics: Domain Management, Domain Names, Law, UDRP
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Promoted Post

Buying or Selling IPv4 Addresses?

Watch this video to discover how ACCELR/8, a transformative trading platform developed by industry veterans Marc Lindsey and Janine Goodman, enables organizations to buy or sell IPv4 blocks as small as /20s.