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Lawful Registrations of Domain Names

Gerald M. Levine

Doug Isenberg notes in a recent CircleID essay that two records in domain name disputes were broken in 2017, namely number of cybersquatting claims (3,036 in 2016, 3,073 in 2017) and number of domain names implicated (5354 in 2016, 6370 in 2017). (Update: John Berryhill reminds me in a twitter after this essay was posted that another record was also broken in reverse domain name hijacking sanctions, 2017 had 45 cases and 2016 had 37 cases.) Fairly consistently from year to year, approximately twenty percent of filings are terminated (withdrawn): whether by settlement or nolo contendere we don't know. (All of these statistics come from the World Intellectual Property Organization (WIPO). It may be, as Mr. Isenberg says, "that cybersquatting is still a lucrative activity," although what is meant by "lucrative" is anyone's guess. In 2016, a shade under 74% of domain names were transferred (the highest number it has ever reached, incidentally, and 185 complaints denied); but in 2017 that percentage dropped to a shade over 60%, with 139 complaints denied. (The percentages are of complaints as a whole without subtracting the withdrawns, which in 2016 were 541 and in 2017 were 437). These numbers suggest both, less cybersquatting, and more complaining. (The numbers that don't come from WIPO directly are statistics calculated by DNDisputes).

These numbers should be view against the extraordinary rise in the number of domain names, from approximately 10 million in 2000 (the first year of the UDRP) to approximately 190 million today (legacy and new TLDs not including country code TLDs, 144.7 million) so that although the number of filings has essentially doubled from the first full year (1500 +) the rise in filings has been incremental rather than astronomical. The filing has not risen in proportionate to the rise in TLDs. Of the total number of annual filings, approximately 90% of claims that make it to award are indefensible. (An expensive irritant for trademark owners which, although quickly relieved, are costly to maintain particularly if they are frequent targets and opt for transfer).

In its implementation document, the Internet Corporation for Assigned Names and Numbers (ICANN) does not explicitly detail what constitutes unlawful registrations (Paragraph 4.1(c)), but the WIPO Final Report at Paragraph 172 offers two examples of innocent behavior: small businesses that are able to show "through business plans, correspondence, reports, or other forms of evidence, that [they] had a bona fide intention to use the [domain] name[s] in good faith" [recent example, AGIRC, ARRCO v. Roustom, Aboudi, Aarrco Inc., D2017-1805 (WIPO December 19, 2017) (ARRCO and ]; and "Domain name registrations that are justified by legitimate free speech rights or by legitimate non-commercial considerations would likewise not be considered to be abusive" [recent example, CPA Global Limited v. Perfect Privacy, LLC / Kobre and Kim LLP, D2017-1964 (WIPO December 26, 2017) (<cpaglobal-litigation.com>]. Of the approximately 10% to 12% of arguably defensible registrations, these two groups of innocent behavior are a small percentage of the whole.

A third kind of dispute is described by WIPO as being in "[g]ood faith" It involves "disputes between competing right holders or other competing legitimate interests over whether two names were misleadingly similar but these dispute would not fall within the scope of the procedure” (emphasis added). The implementation document ends with the warning that "only cases of abusive registrations are intended to be subject to the streamlined administrative dispute-resolution procedure."

When WIPO characterized the three kinds (two within and one outside the scope of the proposed Policy), and ICANN adopted them, they could not have anticipated that there was a fourth kind that would come to dominate the docket of defensible claims. The fourth kind comprises disputes between parties with competing interests for the domain names. The competitors are mark owners and investors (ranging from those offering a few domain names to those that can best be described as operating supermarkets of domain names, many of whom will be found at the NamesCon conferences in Las Vegas in a couple of weeks from now).

It quickly became apparent in the first full year of the UDRP that there was an investor class of registrants actively acquiring domain names composed of generic terms that could be used without infringing trademark or third-party rights. This has accelerated over the years and has been the subject of a good amount of attention by both panelists and judges. It began with a number of important cases in UDRP proceedings as well as in U.S. district courts under the Anticybersquatting Consumer Protection Act (ACPA) that established the boundaries of infringement, such as the competition for generic terms (likely to be lawful if properly curated) and domain names identical or confusingly similar to marks composed of minor changes (for which Panels invented the term "typosquatting" and are likely to be unlawful).

As Panels were presented with registrations of generic terms identical or confusingly similar to marks they not only had to distinguish the lawful from the unlawful but also the limits of lawful registrations and the protective reach of trademarks. This has resulted opening commercial space for the commodification of dictionary words, letters, and numbers, and numbers and facilitating their transformation into assets. None of this could have been predicted yet it is plain in retrospect that domain names (depending on their composition, choice, and number of characters) can be (have in fact for some combinations and numbers of characters become) scarce resources, and are valued accordingly.

The development of the secondary market for domain names is directly responsible for an increase in claims of cybersquatting involving domain names composed of generic terms. (A small percentage of complaints are mark owners whose marks postdate the registrations of domain names but their claims are outside the scope of the UDRP because an earlier registered domain name can never support a claim for registration in bad faith regardless how it is being used). And, even though a complaint may be within the scope of the Policy the demands for proof of cybersquatting can be weighty where the domain names are composed of generic terms such as dictionary words, common phrases, and acronyms.

A couple of examples that illustrate the limitations of trademark protection for generic terms. "Harmoni" (the Panel in Information Tools Limited v. Future Media Architects, Inc., D2017-2178 (WIPO December 23, 2017) tells us) "is a female given name, a word in a number of Scandinavian languages, and a phonetically identical variant of the common English word 'harmony.'" Although Complainant alleges it had a six-month lead over Respondent in using HARMONI it failed to provide any "evidence of sales, advertising or general reputation prior to the registration date, such that the Panel can conclude that the Complainant and its HARMONI Mark was so well known that the Respondent must have had the Complainant in mind at the time it registered the Domain Name." Moreover, "A Google search indicates that 'harmoni' is used as a business name by a number of entities. It is not implausible that in 2003, a party unaware of the Complainant would seek to register a Domain Name consisting of the word "harmoni" for reasons other than to take advantage of any reputation the Complainant had in the HARMONI Mark."

To prevail on a claim of common law rights priority must be supported by proof of reputation (not its reputation currently, but in the past when the domain name was registered.) Otherwise, the fact that "Respondent is clearly offering to sell the Domain Name and in 2015, in response to an enquiry from the Complainant, offered to sell the Domain Name to the Complainant for a sum that is likely to be greater than its out of pocket costs, that by itself is also not a sufficient basis on the present record to find that the Respondent registered the Domain Name in bad faith."

The point (which Information Tools illustrates) is that a finding of cybersquatting has to be earned by proof. The other illustration is for the generic word "virgin." VIRGIN is a potent mark as a noun, but Virgin Enterprises does not own "virgin," and its exclusive right does not extend to all phrases in which the word (as an adjective) is combined with a noun, in this case "living." Virgin Enterprises Limited v. Domain Admin/This Domain is for Sale, Hugedomains.com., D2017-1961 (WIPO December 11, 2017). I should point out that Complainant has prevailed in many UDRP disputes and its front-page news when it loses. The Panel explained that "there is no immediate likelihood of confusion with the Complainant's VIRGIN trademarks if the term is combined with another dictionary word such as in this case, 'living.'" Although VIRGIN predates the domain name, it has no right to "Virgin Living." It has "neither argued that it has unregistered or common law rights in the mark VIRGIN LIVING nor shown that the term 'virgin living' has become a distinctive identifier which consumers associate with the Complainant's goods and/or services."

The important reminder in this "virgin" case is that Respondent "is a domainer which regularly registers domain names that include generic words for the purposes of selling them. Such business activities can be legitimate and are not in themselves a breach of the Policy, so long as they do not encroach on third parties' trademark rights.... The Respondent simply chooses to register generic words as domain names." The lesson to be drawn from these cases is that while symbols and words signifying source certainly deserve protection when they do not signify source they can be trumped.

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, as well as a diverse range of legal and business matters from working with client to resolve commercial disputes, to copyright and trademark counseling and registrations. Visit Page
Related topics: Domain Management, Domain Names, Law, UDRP
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