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Prudential Settlements for Alleged Cybersquatting/Reverse Domain Name Hijacking Under the ACPA

Gerald M. Levine

Given the number of awards endlessly arriving from Panels appointed to decide cybersquatting disputes under the Uniform Domain Name Dispute Resolution Policy (UDRP) (ten to fifteen published daily), the sum total of grievants filing de novo challenges under the Anticybersquatting Consumer Protect Act (ACPA) is remarkably small — one or two at most in any single year; and those rarely proceeding to summary judgment or trial. The number of direct actions under the ACPA on an annual basis (not including claims of fraudulent transfers and counterfeiting) is not significantly higher. There are two good reasons for settling plain vanilla claims, namely lack of merit is quickly sniffed out and separate and apart from the expense of litigation, the ACPA itself is crafted to encourage settlement, or be exposed to statutory damages and attorney's fees, §§1114(D)(iv) and 1117(d) of the Lanham Act of which the ACPA is a part (15. U.S.C. § 1125(d)) that if applied could at worst nullify the value of the prize and at the least be painful.

Parties settle disputes for a variety of reasons including business decisions based on the cost, time, and effort litigating the merits of their claims and defenses. While settlements in no way advance the jurisprudence of domain names, they can nevertheless play an instructive role. This is particularly the case when settlements memorialized in judgments or orders advertently reveal a recognition of what the parties agree their rights actually are. These memorialized settlements are like postmortems: they identify what the parties themselves conclude are the metes and bounds of their respective rights. They do not declare the law but they reinforce what it is.

More so than in commercial disputes that present complex matrices of facts, cybersquatting and reverse domain name hijacking claims are minimally faceted, thus highly predictable. This follows because the factors (expressed as circumstances in the UDRP) that go into determining merit are more likely than not dispositive of the outcome. The UDRP mentions seven circumstances, the ACPA nine; although the palette of factors is larger than those few.

Thus, for example, uncurated websites that contain links to rights holders' competitors or domain names incorporating well-known marks plus dictionary words that reinforce association with marks are patently infringing; while domain names composed of generic and descriptive terms and random letters are patently not, absent other factors that would make them so.

In a very early challenge to a UDRP award transferring the domain name to Complainant that went all the way up to the Fourth Circuit, Barcelona.com, Inc. v. Excelentisimo Ayuntamiento De Barcelona, 330 F.3d 617, 624 (4th Cir. 2003) the court isolated the controlling factor as the registrability of a generic term. Although Excelentisimo Ayuntamiento De Barcelona held marks that included "Barcelona" it did not (in fact could not) own the geographic term itself. The Court also memorably held that the UDRP is "adjudication lite" and Panels' decisions are "not even entitled to deference on the merits." While the court is the ultimate judge of merit at the same time it discloses (as do prudential settlements) the key to its assessment.

Recognizing that after a judicial decision is made the result often appears inevitable, and for this reason, one should resist the temptation of claiming inevitability, it is nevertheless true that once the court identifies the controlling factor(s) all future disputes with like facts must be similarly decided. When judicial outcomes are predictable, it makes little sense to pretend otherwise.

A reasonable segue into prudential settlements is to briefly review three cases in which the parties failed to analyze the factors that inform outcome. They illustrate the cost of being wrong in federal court, two by UDRP losing rights holders and one by a losing domain name holder. Briefly, the operative factors in each of these cases were predictably dispositive of the outcome: demonstrable preparations of use, priority of acquisition, and poor website curation.

1) Airfx.com v. Airfx LLC, CV 11-01064 (D.Ariz. 10/20/2011) (from a UDRP award in favor of Complainant in Airfx, LLC v. Attn Airfx.com, FA1104001384655 (Forum May 16, 2011)).

In this case, the Court held the registration and renewal of the domain name was not unlawful absent proof of Respondent having taken advantage of the rights holder's mark. It not only entered judgment with substantial attorney's fees for two sets of counsel it also on a subsequent motion blocked the rights holder from appealing the judgment for failure to post a supersedeas bond to cover attorney's fees of $103,972.50. The determinative factor (predictable from case law) was the domain holder's use of the domain name in association with an emergent business.

2) Joshua Domond and Harold Hunter, Jr v. PeopleNetwork APS d/b/a Beautifulpeople.Com, Beautiful People, LLC, Greg Hodge, and Genevieve Maylam, 16-24026-civ (S.D. FL. Miami Div. 11/9/2017) (from a UDRP award in favor of Respondent in Beautiful People Magazine, Inc. v. Domain Manager / PeopleNetwork ApS / Kofod Nicolai / People Network Aps / Nicolai Kofod / People Network, FA1502001606976 (Forum May 4, 2015).

In this case Respondent's registration of <beautifulpeople.com> predated Complainant's mark. Under the ACPA, rights holders have no actionable club for cybersquatting for marks postdating the registration of the domain name. Since "Plaintiffs' allegations in the Second Amended Complaint establish that Defendants have priority of use" plaintiff rights holder "simply cannot state claims" for either cybersquatting or trademark infringement. Judgment included attorney's fees in the amount of $62,434.25.

3) Lahoti v. VeriCheck, Inc., 708 F.Supp.2d 1150 (WDWA, 2007), aff'd 586 F.3d 1190, 1203 (9th Cir. 2009) and 636 F.3rd 501 (9th Cir. 2011) (from a UDRP award in favor of Complainant in Vericheck, Inc. v. Admin Manager, FA0606000 734799 (Forum August 2, 2006).

In this case, the Circuit Court affirmed the judgment dismissing the complaint with damages and attorney's fees exceeding $70,000. While "veri" and "check" are generic, combined as VERICHECK it is distinctive. The Court concluded that "[a] reasonable person in Lahoti's position — that is, a reasonable person who had previously been declared a cybersquatter in a judicial proceeding-should have known that his actions might be unlawful."

Since outcomes are predictable in 99.99% of cybersquatting/reverse domain name hijacking claims it follows that the first step to consider is who got it wrong, the UDRP Panel or the challenging party? The following postmortems illuminate the answer.

1) Francois Carrillo v. Autobuses De Oriente ADO, S.A. DE C. V, 18-cv-00347 (D. Colorado December 21, 2018) from the UDRP award in Autobuses de Oriente ADO, S.A. de C.V. v. Private Registration / Francois Carrillo, D2017-1661 (WIPO February 1, 2018) (hereafter "ADO").

A number of commentators pounced on the UDRP decision as wrongly decided (correctly pounced I think), and I discussed what I regarded as the Panel's errors in an earlier essay, What's So Outrageous about Asking High Prices for Domain Names. In their settlement in ADO, the parties agreed as follows:

(i) Plaintiff's interests in respect of the ado.com domain name are legitimate; (ii) Plaintiff did not register or use the ado.com domain name in bad faith; (iii) Plaintiff's registration and current use of the ado.com domain name do not violate Defendant's rights under the Anticybersquatting Consumer Protection Act, 15 U.S.C. §§ 1114, 1125(a) and 1125(d).

The settlement terms were preceded by the following statement: "the Motion is well taken and is GRANTED” (Court's emphasis for "granted"; my emphasis for "well taken"). Even though counsel drafted the Order, I interpret the combined emphases to mean the Court (since it did not strike the "well taken") was as unimpressed with the UDRP award as the commentators. There is no established procedure for providers acknowledging annulment of UDRP awards but once counsel forwards the order or judgment to provider and registrar the award is judicially vacated and no longer enforceable.

2) Corporacion Empresarial Altra S.L. v. Development Services, Telepathy, Inc., D2017-0178 (WIPO May 15, 2017) (<airzone.com>). In this dispute, the Panel denied the complaint, concluded it should never have been brought, and sanctioned the Complainant for reverse domain name hijacking. The Panel called each limb correctly. However, instead of celebrating the trifecta, the Respondent commenced an ACPA action for reverse domain name hijacking damages, Telepathy, Inc, Development Services v. Corporacion Empresarial Altra S.L., 1:17-cv-01030 (D. District of Columbia, November 28, 2017).

Unusual though this tack was, to have the court put ACPA damages flesh on UDRP bones it must have been apparent to the defendant that this first impression claim carried an unusual risk of sufficient concern to strategically pay its way out of the lawsuit. It agreed to pay plaintiff $40,000 dollars.

Other cases include:

  • In an earlier Telepathy case, Telepathy, Inc. v. SDT International SA-NV, 14-cv-01912 (D. Columbia July 9, 2015), Telepathy as Respondent in SDT International SA-NV v. Telepathy, Inc., D2014-1870 (WIPO January 13, 2015) invoked Paragraph 4(k) and moved to terminate or suspend the UDRP proceedings. The majority ruled for termination; the dissent denied Respondent’s motion to terminate the proceedings on the grounds that the Panel should have considered the complaint and denied it with sanctions for reverse domain name hijacking. In the ACPA action, the parties entered into a Consent Judgement and Permanent Injunction that included judgment against defendant for $50,000.
  • Hugedomains.com, LLC. v. Wills, 14-cv-00946 (D. Colorado July 21, 2015) (Respondent in Austin Pain Associates v. Jeffrey Reberry, FA1312001536356 (Forum March 18, 2014). In this case, the consent judgment reads that "Plaintiff did not register or use <austinpain.com> domain name in bad faith and had no bad faith intent to profit from the domain name." Defendant agreed to pay plaintiff $25,000.
  • Jello, LLC v. Camilla Australia Pty Ltd. 15-cv-08753 (D. NJ 8/1/2016) (Respondent in Camilla Australia Pty Ltd v. Domain Admin, Mrs Jello, LLC., D2015-1593 (WIPO November 30, 2015) involving <Camilla.com>. The defendant rights holder agreed to a discontinuance with prejudice with the domain remaining with Plaintiff.

    And finally,

  • Domain Asset Holdings, LLC. v. Blue Ridge Fiberboard, Inc., 2:16-cv-00520 (W.D. Washington July 15, 2016) (Respondent in Blue Ridge Fiberboard, Inc. v. Domain Administrator / Domain Asset Holdings, LLC, FA1602001661150 (Forum March 29, 2016) (<soundstop>). In this case, the rights holder agreed that plaintiff retain control of the domain name.

In each of these UDRP disputes (excluding <airzone.com> in which the Panel got it right), it might be said that Panels misidentified the operative factors that supported Respondents' claims of lawful registration. The important lesson from these cases is that once rights holders are challenged in federal court and compelled to recognize the operative factors, they prudently retreat.

Prudential settlement can also be seen in direct actions under the ACPA. The Estate of Prince Rogers Nelson (known to the world as "Prince") commenced an action against Domain Capital, LLC for cybersquatting and the defendant counterclaimed for reverse domain name hijacking. Result: settlement (terms redacted) reported by Andrew Allemann on Domain Name Wire. However, it is clear from the redaction, reading as it were between the lines, no less than in the UDRP challenges discussed above, that the Estate came to recognize that it had no actionable claim for a generic term, and no choice if it wanted the domain name, except to pay for it.

As with history, settlement terms are dictated by the winners and when the winners are domain name holders, they want the world to know (as a warning to future overreaching rights holders) their registrations were lawful. Whether the settlement terms are expressly stated as in <ado.com> or implied by redaction as in <prince.com> they are compacted versions of the predictable outcome a court would have arrived at should the matters have progressed to judgment. There is wisdom in knowing when to step away!

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. He is the author of a treatise on Trademarks, Domain Names, and Cybersquatting, Domain Name Arbitration: A Practical Guide to Asserting and Defending Claims of Cybersquatting Under the Uniform Domain Name Dispute Resolution Policy. A Second Edition of the treatise was published July 2019 and is available from Amazon or from the publisher, Legal Corner Press (LCP). For inquiries to LCP write to or Mr. Levine at Visit Page
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