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Filing Cybersquatting Complaints With No Actionable Claims

Gerald M. Levine

I noted in last week's essay three kinds of cybersquatting complaints typically filed under ICANN'S Uniform Domain Name Dispute Resolution Policy (UDRP). The third (utterly meritless) kind are also filed in federal court under the Anticybersquatting Consumer Protection Act (ACPA). While sanctions for reverse domain name hijacking are available in both regimes, the UDRP's is toothless and the ACPA's a potent remedy. As a result, claimants who would not dare to file complaints in federal court (or if they do dare lack appreciation of the risk) have no hesitation in maintaining UDRP proceedings.

There is a steady stream of UDRP complaints alleging cybersquatting against registrants whose registrations predate complainants trademark rights. While these complainants have standing they have no actionable claims. If the only risk to filing these complaints is a mild slap on the wrist, then complainants have no disincentive trying their luck in the hope providers will appoint panelists who either subscribe to the retrospective bad faith theory of liability or find bad faith on renewal of domain registrations. While the retrospective bad faith theory of liability appears to have retreated from panelists' repertory of awards it emerges in a less toxic form by panelists rejecting requests for reverse domain name hijacking even where trademarks postdate domain registrations and complaints could not possibly state any actionable claim.

There is a split of view about sanctioning complainants under the UDRP who are overreaching their rights. This is very different from the view taken by federal judges under the ACPA. The better reasoning for RDNH under the UDRP where complainants knew or should have known their complaints could not succeed is to sanction complainant for abusive use of the proceedings; not appropriate for weak cases, but certainly warranted for meritless ones. This precisely describes trademark owners whose rights postdate domain name registrations. Two decisions from veteran panelists stand out: Nucell, LLC. v. Guillaume Pousaz, CAC 101013 (ADR.eu July 7, 2015) and Cyberbit Ltd. v. Mr. Kieran Ambrose, Cyberbit A/S, D2016-0126 (WIPO February 26, 2016). Majority Panels that have declined to award RDNH for abuse of process have elicited strong opinions from the concurring/dissenting members on RDNH.

When we move to statutory claims of cybersquatting, we are in a totally different environment. Federal courts have no hesitation in awarding damages for reverse domain name hijacking under the ACPA. Commencing meritless actions is always risky but the risk is intensified under the ACPA because it expressly grants damages up to $100,000 per domain name under 15 U.S.C. §1117(d) and attorney's fees where the courts finds the case exceptional under 15 U.S.C. §1117(a). Whether plaintiffs can extricate themselves after commencing the action depends in part on defendant's aggressiveness in objecting to voluntary dismissal.

In a Southern District of New York case in 2015, Office Space Solutions, Inc v. Jason Kneen, 15-cv-04941 dismissed with prejudice defendant (surprisingly) did not seek damages or attorney's fees. That is unusual and not typical; other complainants have not been so lucky. The degree of risk is illustrated in Heidi Powell v. Kent Powell and Heidi Powell, 16-cv-02386 (D. AZ) (a direct filing in federal court, not a de novo action following a UDRP award). Plaintiff alleged she is a well-known guru in the health area. When she "attempted to register the domain name www.heidipowell.com" she discovered it was already taken by defendant, a grandmother whose name happens to be Heidi Powell. The plaintiff "Heidi Powell" was not baptised with that name.

It is evident from reading the complaint that plaintiff had no understanding of the risk in filing the complaint. She alleges that "in 2012, well after Heidi Powell had become a public figure, and as part of the logical zone of expansion of her media empire, Heidi Powell attempted to register the domain name www.heidipowell.com . . . to bring together all of Heidi Powell's digital media in one central platform." Here are the key opening allegations:

  1. When Heidi Powell attempted to register the domain name she learned that it was already taken by Defendant Kent Powell.
  2. Upon information and belief, Kent Powell registered the Domain Name with GoDaddy on or around November 26, 2005.
  3. Heidi Powell sought to purchase the Domain Name from Kent Powell because the website was simply a parked site without any content, and because the Domain Name is identical to the HEIDI POWELL trademark.
  4. Kent Powell refused to sell the Domain Name to Heidi Powell.

Perhaps, plaintiff believed defendants wouldn't contest the complaint would and she could take the domain name on default; and accepted the risk she was told about. Perhaps, she was unaware of the risk and it only dawned on receiving the answer. However, counsel familiar with the ACPA would have immediately recognized the admissions contained in these allegations could not possibly survive a motion to dismiss.

The reasons for this are 1) trademark rights are forward-looking from their first use in commerce (registered or unregistered), not retrospective; 2) passive holding of domain names is not cybersquatting; and 3) only marks distinctive at the time domain names were registered do trademark owners have standing under the ACPA. Section 1125(d)(1)(a)(ii)(I). In their answer and counterclaim defendants requested damages up to $100,000 dollars and attorney's fees.

Owning domain names corresponding to later acquired marks, whether parked or not resolving to websites, and refusing to sell them to mark owners for any price or high price is not cybersquatting; and if the domain name is passively held by a party with the same name there can be no claim of trademark infringement.

Following defendant’s answer and counterclaim for the full $100,000 in Heidi Powell plaintiff suddenly woke up to the realization she risked significant financial consequences for having commenced the action, and abruptly moved to voluntarily dismiss the complaint. But, it may be too late to withdraw without one of the other or both damages and attorney's fees. Defendant's counsel has filed a proposed order for a finding that the case is “exceptional” under §1117(a) (making defendant eligible for attorney’s fees), ordering the complaint dismissed with prejudice, but allowing defendant's counterclaim to remain pending for independent adjudication.

The same overreaching occurred in a UDRP complaint by SDT International, SDT International limited company v. Telepathy, Inc., D2014-1870 (WIPO January 13, 2015 but Respondent removed the matter to federal court, Telepathy, Inc. v. SDT International SA-NV, 14-cv-01912 (D. Columbia July 9, 2015). Recognizing its risk, defendant capitulated in a Consent Judgment and agreed to pay plaintiff $50,000 together with a permanent injunction.

The only possible claim for owners with later acquired marks that have developed a market presence, and only if the facts support it, is for trademark infringement but the standards are significantly different from proving cybersquatting. Cases like Heidi Powell and Telepathy should be wakeup calls. Incidentally, what is true about risk for the trademark owner is equally true for domain name owners challenging adverse UDRP awards in federal court. The ACPA is a symmetric statute; whichever party is found to have overreached, the prevailing party is entitled (where the facts warrant) to damages and attorney fees.

Editor's note: Correction was made to the paragraph referring Heidi Powell's case where the proposed order was incorrectly mentioned as a signed order.

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 Names, Law, UDRP


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