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The Rise of a Secondary Market for Domain Names (Part 4/4): Facilitating the Secondary Market

Gerald M. Levine

The defining of rights in the UDRP process is precisely what WIPO and ICANN contemplated, but it is unlikely they foresaw the destination of the jurisprudence. Since its inception, UDRP Panels have adjudicated over 75,000 disputes, some involving multiple domain names. (These numbers, incidentally, are a tiny fraction of the number of registered domain names in legacy and new top-level domains, which exceeded 320 million in the first quarter 2017). However, roughly ninety percent of UDRP decisions can be discounted because respondents have no defensible claim to accused domain names and do not even bother to appear or argue that they do. I do not regard this class of registrants as entrepreneurs (which I reserve for the investor class) but rather as bottom feeders, although there are some who fancy themselves to be acting in good faith when the evidence is clearly against them.

The development of domain name jurisprudence insofar as drawing the boundaries of rights is therefore based on some ten percent of the adjudicated disputes. Panels began parsing rights in the first year of the UDRP, and they have not stopped. In the first denial (the fifth filed complaint), the respondent acquired the domain names before the complainant rebranded its business with the knowledge that the corresponding domain names were unavailable. [1] The respondent-investor had priority, and it prevailed.

This was quickly followed by another dispute in which the mark owner had priority, but the domain name was composed of a dictionary word, "allocation." The panel explained that the difficulty lay in the fact that

the domain name allocation.com, although descriptive or generic in relation to certain services or goods, may be a valid trademark for others. This difficulty is [com]pounded by the fact that, while "Allocation" may be considered a common word in English speaking countries, this may not be the case in other countries, such as Germany. [2]

The panel found that the registration and offering for sale of allocation.com constituted a legitimate interest of the respondent in the domain name, although it would be "different if it were shown that allocation.com has been chosen with the intent to profit from or otherwise abuse Complainant's trademark rights." The complainant offered no evidence of "intent to profit," and its complaint was, accordingly, denied.

Chief among the principles of domain name jurisprudence for investors are rights or legitimate interests founded on (1) a "first-come, first-served" basis (not necessarily limited to registrations postdating marks' first use in commerce); (2) registration of generic strings used (or potentially usable) in non-infringing ways for their semantic or ordinary meanings; and (3) making bona fide offerings of goods or services (which by consensus includes pay-per-click websites and reselling domain names on the secondary market).

Thus, as a general matter, it is not unlawful to have registered successbank.com following its abandonment by a bank known before its merger with another financial institution as "Success National Bank." [3] The complainant's rebranding to SUCCESS BANK notwithstanding, it had no right to a lawfully registered domain name even though the second level domain is identical to its mark. Nor, is it unlawful to register a geographic indicator — a cambridge.com for example — where the resolving website is devoted to providing information about Cambridge. [4] Cambridge University may have a seven-hundred-year history of marketing its services, but the domain name does not violate its statutory rights.

There was a momentary setback in a dispute over the word "crew" [5] in 2000. The panel majority found that the respondent was "a speculator who registers domain names in the hopes that others will seek to buy or license the domain names from it" and awarded the domain name to the clothier that owned the mark. A vigorous dissent took the position that has become the consensus opinion of panelists that "speculating" in domain names is not abusive per se. This is demonstrated in later cases such as shoeland.com (2009) in which the panel held that "registering such a generic domain name is a business practice that confers upon the practitioner rights or legitimate interests in that domain name." [6]

This delineation of parties' respective rights has been continually reinforced, and it is now well established that mark owners have no right to corresponding domain names unless they can prove cybersquatting, which is increasingly difficult to establish with weak marks. This is reflected in a number of recent UDRP decisions. For example, in J.D.M. Software B.V. v. Robert Mauro, WDINCO (decided in the respondent's favor over a strong dissent) the complainant alleged that "JDM" infringed its Benelux Trademark, which, the respondent countered, was a simply desirable string of letters for businesses in many different lines of trade. [7] The complainant argued that

the use of the disputed domain name to resolve to a website with PPC links and an offer to sell the disputed domain name at what the Complainant characterizes as a "clearly disproportionate price" cannot be considered a good faith offering of goods or services under the Policy.

However, neither pay-per-click links nor the "clearly disproportionate price" are factors in determining bad faith where the registration is lawful. The Panel held that "the evidence shows [JDM as having] a very wide range of potential associations and is in fact in use by numerous businesses other than the Complainant."

The consensus view is set forth in the newly released (May 2017) WIPO Overview 3.0 which the J.D.M. Panel noted "fairly summarizes the weight of UDRP panel decisions" on this issue:

the use of a domain name to host a parked page comprising PPC links does not represent a bona fide offering where such links compete with or capitalize on the reputation and goodwill of the complainant's mark or otherwise mislead Internet users. [8]

However, where the links do not "compete with or capitalize on the reputation and goodwill of the complainant's mark," the registration is not unlawful. Trademark owners have adjusted to this. While the number of registered domain names has increased exponentially, the number of UDRP complaints has remained steady over the last decade at around 5,000 per year. Where the disputed domain name consists of dictionary words, generic terms, descriptive phrases, or random letters, and the complainant contacts the respondent to negotiate purchasing the domain name, the respondent has every right to capitalize on the inherent value of the lexical string regardless of whether the domain name is identical or confusingly similar to the complainant's mark.

The final point to be made is that the value of domain assets is market driven. Since dictionary words (alone or with qualifying words), descriptive phrases, and many combinations of random letters useful as acronyms are already unavailable for the dot-com space, new businesses are compelled to buy domain names from investors and bid through auction websites. As noted, claims of outlandish, exorbitant, and unreasonably high prices are not a factor in proving bad faith, as several other recent cases make abundantly clear.

For example, for countryhome.com the panel held that the price "show[s] a reasonable business response to an inquiry about purchasing a business asset." [9] For babyboom.com the panel held that "[i]n the absence of any evidence from the Complainant that the Respondent had registered the disputed domain name with reference to the Complainant, the Respondent was fully entitled to respond to the unsolicited approach from the Complainant by asking whatever price it wanted for the disputed domain name." [10] And for coldfront.com, the panel held that "[i]f the Respondent has legitimate interests in the domain name, it has the right to sell that domain name for whatever price it deems appropriate regardless of the value that appraisers may ascribe to the domain name." [11]

Conclusion

When competitors vie for the same commodity, it becomes increasingly scarce. [12] Counter-intuitive though it may sound, and for the reasons I have explained, the cultural resources from which names were once mined has become exhausted. Where there is opportunity to create demand (by buying up addresses and controlling supply), there is bound to develop a business niche, which for the Internet is filled by investors of different ranks.

The hard lesson for businesses is that investors have competing rights. When it comes to advising clients, the best counsel can do is urge them not to register marks before acquiring corresponding domain names. For businesses with newly minted marks with no corresponding domain names, there is no legal remedy except to pay the pipers who had the prescience to register desirable names and are holding them for resale at (sometimes) "exorbitant," "excessive," and "unreasonable" prices. [12]

Endnotes:

[1]Telaxis Communications Corp. v. William E. Minkle, D2000-0005 (WIPO Mar. 5, 2000) (telaxis.com and telaxis.net).
[2] Allocation Network GmbH v. Steve Gregory, D2000-0016 (WIPO Mar. 24, 2000).
[3] Success Bank v. ZootGraphics c/o Ira Zoot, FA0904001259918 (Forum June 29, 2009) (Rebranding to SUCCESS BANK without due diligence of the corresponding domain name).
[4] The Chancellor, Masters and Scholars of the University of Cambridge v. Kirkland Holdings LLC, D2015-1278 (WIPO Oct. 5, 2015) (cambridge.com. The three-member Panel criticized Complainant's counsel for "exceed[ing] the bounds of advocate's hyperbole."
[5] J. Crew International, Inc. v. crew.com, D2000-0054 (WIPO Apr. 20, 2000) (crew.com).
[6] Shoe Land Group, supra); X6D Limited v. Telepathy, Inc., D2010-1519 (WIPO Nov. 16, 2010) ("Due to the commercial value of descriptive or generic domain names it has become a business model to register and sell such domain names to the highest potential bidder.")
[7] D2017-1182 (WIPO Aug. 23, 2017).
[8] Paragraph 2.9 and for acronyms 2.10.2. The current version of the Overview is available at http://www.wipo.int/amc/en/domains/search/overview3.0/.
[9] Decisions too numerous to cite, but representative examples from the first year of the UDRP include Meredith Corp. vs. CityHome, Inc., D2000-0223 (WIPO May 18, 2000) ("The fact that Respondent is seeking substantial money for what it believes to be a valuable asset is not tantamount to bad faith").
[10] Wirecard AG v. Telepathy Inc., Development Services, D2015-0703 (WIPO June 22, 2015).
[11] Personally Cool Inc. v. Name Administration Inc. (BVI), FA 1474325 (Forum Jan. 17, 2013) (coldfront.com).
[12] See Shoe Mart Factory Outlet, Inc. v. DomainHouse.com, Inc. c/o Domain Administrator, FA0504000462916 (Forum June 10, 2005) ("With all due respect to my brother Panelists, I must dissent. As an overall matter, I believe the UDRP was designed to regulate a scarce resource (domain names) rather than to provide a mechanism to protect registered trademarks"); Micah Hargress v. PARAMOUNT INTERNET, FA1509001638609 (Forum Nov. 13, 2015) (hargress.com. "Respondent is in the business of registering valuable non-infringing generic domain names and surnames because Respondent knew that they are inherently scarce, attractive, and useful to many parties and it is a fully acceptable practice in the domain name industry, consistent with UDRP guidelines and established precedents.")
[13] See Shesafe Pty Ltd v. DomainMarket.com, D2017-1330 (WIPO Aug. 22, 2017) (shesafe.com). Before Respondent received the complaint it was offering shesafe.com for around $10,000 dollars. Following its dismissal, the value of the domain name escalated into the stratosphere as graphically described in a post on DomainGang: "Since the decision, Mike Mann has jacked up the price tenfold, seeking now no less than $94,888 dollars!” (bolding in original).

Other parts in this series:

Part 1: A Tale of Competing Interests
Part 2: Origins of the Competition
Part 3: Domain Names as Virtual Real Estate
Part 4: Facilitating the Secondary Market

Originally published in Vol. 26, No. 3 of Bright Ideas (Winter 2017), a publication of the Intellectual Property Law Section of the New York State Bar Association.

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
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The perceived value of a domain name Phil Howard  –  Feb 07, 2018 9:52 PM PDT

Although, I once did so, I no longer even consider the domain name to be of any particular significance when I visit a page.  Consistency helps, but that is only relative ... is it the same domain?  I just don't bother looking at the domain name unless I am diagnosing some DNS issue.  The domain name could be "yivb8u66nizhbrdjan2dhc3x.net" for all I care.

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