Home / Blogs

Recovering Domain Names Lost to Fraudulent Transfer

Gerald M. Levine

Domain Names composed of generic terms and combinations — dictionary words, random letters, and short strings — have achieved ascending values in the secondary market. DNJournal.com (Ron Jackson) reports on his year to date chart, for example (just a random sampling from the charts) in August 2019 <joyride.com> was sold for $300,000, in June <voice.com> sold for $30 million, in July <rx.com> sold for $1 million, and in January <california.com> sold for $3 million; on his weekly chart for August 19-25 he reports that <skew.com> was sold for $93,000 and <homee.com> for $20,000. Resellers of every size have inventories of domain names in some instances so large and varied they have become veritable department stores for every conceivable taste and possible brand. The magnitude of the reported sales suggests that businesses have come to depend on resellers than go to the trouble of inventing brand names from scratch.

Needless to say, such values for domain names offer enticing opportunities for mischief, and at the same time put registrants of valuable domain names at risk of having them stolen from their accounts. (For a useful discussion on domain name theft see Domain Name Theft: How to Avoid Buying Stolen Domain Names & Protect Your Own Domain Names). The sheer value and sometimes easy picking incites thieves to mine registration accounts for saleable domain names. Recent fraudulent transfers, as reported in DomainNameWire (Andrew Allemann) include <eqn.com>, <1001.com>, <864.com>, and in an August 26 blog he reports on another lawsuit involving <tabelaFipeBrasil.com>. (See Mr. Allemann's advice on protecting domain names). I'll discuss the "EQN" case further in context with other cases decided in federal court under the Anticybersquatting Consumer Protection Act (ACPA). Fraudulent transfers often happen without holders' immediate knowledge of the thefts, and it may take many months before they even learn the domain names have disappeared from their accounts.

The question is, what legal steps must victims take, and what are their chances of recovering fraudulently transferred domain names? The Uniform Domain Name Dispute Resolution Policy (UDRP) has been successfully applied, although some panelists have got it wrong, Lawrence Gurreri v. To Thai Ninh, FA100600 1328554 (Forum July 12, 2010) (<internationalcircuit.com>) where the Panel found that "alleged theft of a domain name falls outside the narrow scope of the UDRP." The correct view is expressed in Anglotopia, LLC v. Artem Bezshapochny, D2013-0168 (WIPO March 13, 2013) (<anglotopia.net>) in which Respondent argued that "the Policy is not designed to deal with allegations of fraud or theft," to which the Panel responded that that is only true "where a complainant does not have trademark rights and is seeking to recapture a hijacked domain name," but where complainant has trademark rights the claim falls within the Policy.

In fact, panelists have not hesitated to condemn fraudulent transfers and return domain names to complainants on a theory that hacking and transferring are abusive registrations. To take one example of several, the Panel in Stepp Manufacturing Company Incorporated v. Protection of Private Person, FA1608001686520 (Forum September 9, 2016) (<steppmfg.com>) pointed out that

Prior panels have held that a respondent's apparent hijacking of another's domain has registered and used the domain in bad faith ... [citing] ITX sarl v. Steiner, FA 1222737 (Forum October 24, 2008) (finding that, where "Complainant has shown that it has a long-term ownership of the domain name at issue before the domain name came under the control of Respondent," and where there was also evidence that the domain name had been transferred to Respondent without the permission of Complainant at a time when Complainant was the registered owner of the domain name, Respondent had registered and was using the disputed domain name in bad faith pursuant to Policy ¶ 4(a)(iii).")

Compared to cases brought to federal court under the ACPA, the UDRP database contains a relatively small number of transfers of hijacked domain names, and none recently. This may be because the UDRP is designed to deal with domain names serviced by registrars, rather than domain names in the root directory administered by registries. With this as background it is interesting that the UDRP database contains no investor-reseller complaints even though they certainly have viable marketing or monetizing businesses for their domain names sufficient (one would think) to prove common law rights. The reason for this (I think) is the difficulty for this class of victim to prove it does have those rights.

Rather than test their claims under the UDRP, investor-resellers have turned to the Eastern District of Virginia, Alexandria Division (the location of Verisign, Inc., the dot com registry) to recover possession of the domain names under the ACPA. That court has proved particularly friendly to the argument that marketing and monetizing domain names supports common law rights.

The lead case, Weitzman v. Lead Networks Domains, l:09-cv-01141 (ED Virginia, Alexandria Div, 9/24/2010) involved nineteen domain names including <daffy.com>, <oncologics.com>, and <sunlet.com>. On the issue of common law rights and standing, the court (Magistrate's Recommendation) found:

Plaintiff is in the business of domain monetizing and establishes and registers domain names for the purpose of turning Internet traffic into monetary gain through the use of "click through traffic." (Compl. 9.) Domain monetizing is a process in which advertisements are placed on "parked" domain names in order to generate revenue for both the party that owns the domain and the party that places the advertisement.... Plaintiff's pervasive use of the Domain Names transposed the trademarks into valuable assets to Plaintiff, representing Plaintiff's substantial goodwill and solid reputation with consumers. (Compl. ¶ 12.) Therefore, through Plaintiff's longstanding, continuous, and exclusive use of the Domain Names, Plaintiff owns valid and enforceable rights to each of the registered Domain Names. (Emphasis added).

The Magistrate Judge concluded that "legal precedent dictates that Plaintiffs Domain Names should be afforded the protection of the ACPA."

This view of investor-monetizing/reseller rights is recognized in later cases. In Traffic Names, Ltd. V. Zhenghui Yiming In Re: 224.com, 604.com; and 452.com, 1:14cv1607 (E.D. Va, Alexandria Division April, 14 and May 12, 2015) the Magistrate Judge held: "Plaintiff's registration of the Subject Domain Names and use of them in business since that registration establishes his common law rights in the marks. Therefore, plaintiff is entitled to enforce the provisions of §1125(d) against any domain name that violates its rights in the protected marks."

This view is cemented more recently in Blackshore Properties, Inc. v. EQN, an Internet domain name, et al. l:I8cvI325. In its complaint, the Plaintiff had alleged

18. Blackshore used the EQN.com domain name in U.S. commerce in association with the paid provision of information and advertisements for goods and services until Defendant John Doe stole the domain name and thereby disabled Blackshore's access to and control of the domain name.

19. Blackshore is entitled to common law trademark protection in the EQN.com mark by virtue of its use of the mark in U.S. commerce in association with paid advertising and information services.

The Court (Magistrate's Recommendation January 11, 2019 and Order confirming the Recommendation January 28, 2019) did not question Plaintiff's contention that it had common law rights for its business operations involving the stolen domain name. It concluded that the domain name had been spirited away from Plaintiff's account and it was entitled to relief:

Plaintiff ... established that it is the rightful owner of EQN.com and the associated trademark, that Doe had a bad-faith intent to profit from using that domain name, and that the domain name Doe was using was identical to plaintiffs distinctive mark.

This view appears to be challenged in another recent decision, a still-pending and becoming an increasingly complicated case, Yoshiki v. John Doe, 18-cv-01338 (LO/TCB ((ED Virginia, Alexandria Div. 2019). The Magistrate Judge tacks differently on rights and standing by taking notice of a line of cases critical of certain uses of domain names by defendant-hackers and applying that as a standard for assessing standing to investors monetizing and reselling domain names. At first glance, there appears to be two parallel views within the Alexandria Division, but on closer look, there is a good argument that this is not the case. Under the Weitzman line, lawful monetizing and reselling is sufficient to support ACPA standing. Post-Weitzman (according to the Magistrate Judge in Yoshiki) ”this Court has found on several occasions that a defendant violated ACPA because, in part, they only used the disputed mark and domain name for pay-per-click advertising." The question is whether this analysis of the law is a departure from precedent or a reasoned response to particular facts?

I opt for a reasoned response to particular facts. The key difference with Weitzman is that the Yoshiki court is looking at the conduct of defendants accused of fraudulent transfers, not the business model of investor-monetizing/reselling plaintiffs. The court cites Entrepreneur Media, Inc. v. B-Entrepreneur.com, 1:11-cv-583 (E.D. Va. Feb. 9, 2012) and Travelers Indem. Co. v. Travellers.com, 10-cv-448 (E.D. Va. November 28, 2011. In neither case is there any question of standing because both plaintiffs own well-known, even famous marks; they are not investors. Rather, the court is challenging plaintiffs to explain why they are different from the defendants in the cited cases who employ the hacked domain names unlawfully under the ACPA. That is a far distance from assessing whether investors lack standing to maintain an ACPA case for a business model of monetizing their domain names.

The essential insight of Weitzman, which has never been challenged on appeal (and is unlikely ever to be challenged because defendants never appear), elevates domain names to the status of the property and their holders to trademark owners. The Yoshiki challenge to victims is that they cannot expect to be granted trademark status (thus would lose on standing) for registering domain names identical or confusingly similar to well-known or famous brands or marks. In other words, they cannot at the same time, be tort-feasors and claim rights to infringing domain names. The Magistrate Judge in Yoshiki stated that it

is especially concerned about the prospect of granting relief when Plaintiff's only use for domain names such as tang.com, wtv.com, and nnn.com is domain monetization. Names such as "tang" arouse the Court's suspicion that Plaintiff may be engaged in the type of activity that ACPA was intended to remedy. (Emphasis added).

A principal consideration in restoring domain names lost to fraudulent transfers to victims must be whether they are "engaged in the type of activity that ACPA was intended to remedy." If they are, they cannot expect any sympathy from the court.

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
Follow CircleID on
Related topics: Domain Management, Domain Names, Law, UDRP
SHARE THIS POST

If you are pressed for time ...

... this is for you. More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

Vinton Cerf, Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Share your comments

To post comments, please login or create an account.

Related

Topics

Cybersecurity

Sponsored byVerisign

DNS Security

Sponsored byAfilias

Domain Names

Sponsored byVerisign

Whois

Sponsored byWhoisXML API

Cybercrime

Sponsored byThreat Intelligence Platform

New TLDs

Sponsored byAfilias

IP Addressing

Sponsored byAvenue4 LLC