Home / Blogs

June Court Decision Detrimental to Domaining Practices

Eric Goldman

In a June court ruling, domainer Navigation Catalyst and registrar Basic Fusion lost a cybersquatting lawsuit to Verizon.

Verizon California, Inc. v. Navigation Catalyst Systems, Inc. [PDF], 2008 WL 2651163 (C.D. Cal. June 30, 2008). The Justia page. A page with some of the early filings.

This is an extremely interesting and potentially precedent-setting case regarding domaining and domain name tasting. The court condemns both practices, leading to a preliminary injunction against the domainer and its registrar based on the Anti-Cybersquatting Consumer Protection Act (ACPA). As far as I can recall, this is the first time that a domainer has lost an ACPA lawsuit in court, and it provides an important data point confirming that domaining can be cybersquatting (a previously unresolved issue). I also believe that this is the first time a domain name registrar has lost an ACPA lawsuit. Although the court wasn't asked to assess damages (it was just an injunction request), it's clear from the strongly worded opinion that Verizon will get paid if the case gets that far. As a result, this is a major loss for domainers and might very well force them to change their practices.

The defendants are Navigation Catalyst, a domainer, and Basic Fusion, its registrar. Navigation Catalyst engaged in some common domainer practices, including:

  • high volume automated domain name tasting. Many of the registered domains have nothing to do with anyone's trademark, but some were typographical error versions of Verizon's trademarks (allegedly, nearly 1400 were variations of Verizon's trademarks)
  • trademark "scrubbing" of domain names during the tasting period (both an automated blacklist and a manual review)
  • disabling ads on any challenged domains and offering to transfer those domain names to the trademark owner

Despite the scrubbing, Navigation Catalyst registered and kept 126 domain names that Verizon alleges infringe its trademark. Navigation Catalyst also tasted nearly 1300 other challenged domains, and as the court points out, made some money from those domains during the tasting period.

Navigation Catalyst's main defense is that it merely reserved the domains during the tasting period instead of "registering" them (the ACPA statutory requirement) because they hadn't paid for the domains prior to the end of the grace period. Not surprisingly, the court is completely unimpressed with this sophistry.

Further, the court determines that domain tasting is a bad faith intent to profit under the ACPA:

It is clear that their intent was to profit from the poor typing abilities of consumers trying to reach Plaintiffs' sites: what other value could there be in a name like ve3rizon.com? Further, the sites associated with these names often contained links to products directly competitive with Plaintiffs' cellphone and internet businesses, potentially diverting consumers who would otherwise have purchased goods or services from Plaintiffs away from Plaintiffs.

Finally, the defendants tried to argue that Verizon had unclean hands because of Verizon's monetization of wildcard traffic in its FIOS service. Despite some pretty apparent duplicity on Verizon's part, this argument also fell on deaf ears.

While this is a big loss for the domainer, it's a shocking ruling against the registrar. After all, the ACPA specifically limits injunctions against domain name registrars (see 15 USC 1114(2)(d)(i)(II)), and the court did not discuss this section at all or otherwise why an injunction against the registrar was appropriate. I suspect the registrar should be able to get the court to clarify or reconsider its ruling if it asks.

It will be interesting to see how this ruling affects the domainer industry. There is absolutely no good news for them in this ruling. This court rejected the standard risk-management that domainers claim protect them from cybersquatting liability. Further, the big win will only encourage Verizon — already one of the most aggressive plaintiffs against domainers — to keep suing, and it might spur other trademark owners to join the party. Although a single ruling like this often doesn't change an industry overnight, I wouldn't be surprised if we look back in a couple of years and point to this ruling as the beginning of the end of standard domaining practices circa 2007-08.

By Eric Goldman, Professor, Santa Clara University School of Law
Follow CircleID on
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

Eric,This was one of several suits Verizon John Berryhill  –  Aug 03, 2008 11:20 AM PST

Eric,

This was one of several suits Verizon has brought on the subject of domain tasting.

Considering that most domainers (and their trade organization, the ICA) have been opposed to massive tasting which has only been conducted by a handful of organizations, I'm curious to know the numerical basis on which you characterize the suit as involving "common" or "standard" domainer practices.

Can you elaborate on how common the practice of domain tasting is?

Typosquatting Brian Hall  –  Aug 04, 2008 7:01 AM PST

The question becomes what can domainers do to improve "the standard risk-management that domainers claim protect them from cybersquatting liability." The trademark "scrubbing" obviously did not serve its purpose here.  These domains are not even arguably generic or merely descriptive, which is likely why the court was so inclined to hold Navigation Catalyst's actions were in violation of the ACPA. 

As Mr. Berryhill notes, domainers have been opposed to not only massive tasting, but also clear typosquatting.  However, domainers need to ensure that whatever risk-management mechanisms they use coincide with that vehement opposition to tasting and squatting.  A more detailed "scrubbing" is likely the best way to limit problematic domains (such as the ones in this lawsuit).  While offering to transfer domains to trademark owners may work in some situations, some companies may not ask and simply choose to have a court order a transfer.  Therefore, policing a domain portfolio requires an initial risk assessment, regular auditing, and possibly domain purging (i.e. getting rid of problematic domains).  Verizon is definitely coming, and others may follow.  Is your domain portfolio ready?

Domainers and Cybersquatters Enrico Schaefer  –  Aug 04, 2008 7:26 AM PST

The word "domainer" presupposes the legitimate buying, selling and monetization of domain names. The word "cybersquatter" means the illegal and intentional act of registering domains which infringe the trademarks of third parties.

Navigation Catalyst is not a "domainer" in my book.  It is a mass cybersquatter plain and simple. None of the domain names held in the portfolio at issue in the above case were generic or descriptive.  All of them were obvious typos of Verizon's trademarks. Isn't it time we created distinct terminology between those who legitimately speculate in the generic and descriptive domain market and those who set out to divert trademark protected traffic?

Most domainers find the business model of Navigation Catalyst - mass registration of domains which include trademark protected words - to be as distasteful as trademark holders.  You can read more commentary about another version of Eric Goldman's Verizon v. Navigation Catalyst Systems cybersquatting post here.

Are all Land Developers Robber Barrons? Enrico Schaefer  –  Aug 04, 2008 7:52 AM PST

This issue was previously discussed by Frank Schilling in his post Are all Land Developers Robber Barrons? in response to Prof.  Goldman's previous interview here.  In all fairness, Professor Goldman has never stated, to my knowledge, that all domainers are in fact cybersquatters.  However, there is a disconnect in terminology and approach. There are some people who believe that the domainer model of buying, selling and monetization domain names is illegitimate in all its forms. Obviously, the value and legitimacy of parked pages remains a hotly debated issue.

Obviously, the value and legitimacy of parked John Berryhill  –  Aug 04, 2008 8:13 AM PST

Obviously, the value and legitimacy of parked pages remains a hotly debated issue.

One of my favorite examples in that regard is to compare the website at legal-help.com with the website at legalhelp.com.  At which site is a random user of a global computer network more likely to eventually find help relating to a legal problem that they might have?

(One is a legal PPC site, the other is a solo practitioner in Hillsboro, Oregon)

Isn't it time we created distinct terminology John Berryhill  –  Aug 04, 2008 8:08 AM PST

Isn't it time we created distinct terminology between those who legitimately speculate in the generic and descriptive domain market and those who set out to divert trademark protected traffic?

...which was the intended purpose of the term "domainer" as a self-identification mechanism among domainers.

Your point is well taken, but there will always be those who harbor a reflexive distaste for the fact that many domain names have economic value independent of any trademark claim. 

There are indeed organizations which have very large portfolios of domain names.  The "typical" or "standard domainer" in my experience are everyday folks with a real day job who supplement their income by managing and trading on domain collections of a few dozen to a few hundred.  Quite often, the alleged cybersquatter in a UDRP dispute is defending one of the only domain names they have (e.g. WIPO D2000-1202, WIPO D2002-0839, NAF 547889).

Using the domain name decal.com to advertise the sale of, get this, decals - is not even to avoid being branded as a cybersquatter in the eyes of the endlessly covetous - WIPO D2008-0585.

However, cybersquatters have been consistently and rightfully losing ACPA cases since its enactment.  At the end of the day, "cybersquatting" is an offense of intent in a given factual context, and not a status offense.  Surely, John Zuccarini also had quite a few perfectly defensible domain names, and certainly the most careful domain registrant will always have domain names which are the subject of a trademark claim in one jurisdiction or another (e.g. witness the new "duty" of a US domain registrant to conduct a search using the Brazilian Google.com.br before thinking of registering a domain name postulated in the dissent to WIPO D2008-0389.

The occasional accusation, and the occasional loss, is a business/legal risk like any other.  If I am "filtering" a domain name list that includes ILikeCheer.com then is the fact that "CHEER" is a famous trademark relevant to my use of the domain name in connection with cheerleading?  It can be if some clever PPC advertiser figures out how to get their detergent ads on my website without my knowledge.  But, again, that's simply a normal risk of loss like any other business.  We never refer to the famous "patent infringer Microsoft" or "anti-trust violator Microsoft" even though that perfectly legitimate company has racked up some of the most stellar judgments when it has run afoul of patent law or anti-trust law.

So, what do we call companies like Microsoft, which from time to time violate patents?  Or companies like Dell, which from time to time violate consumer credit laws (as the State of New York recently determined)?  Or companies like Verizon which apparently has violated laws which motivate the President of the United States to lobby for criminal immunity on their behalf?

We call them businesses, and every business has its peculiar recurring legal risks. Your local grocery store will be sued more times this year for negligence (slip and falls) and defective products than the average "domainer" will be accused of cybersquatting.

Ultimately, the name calling is not as productive as the day-to-day grind of resolving what are, at bottom, fact-specific disputes.

To post comments, please login or create an account.

Related

Topics

IP Addressing

Sponsored byAvenue4 LLC

New TLDs

Sponsored byAfilias

DNS Security

Sponsored byAfilias

Cybersecurity

Sponsored byVerisign

Domain Names

Sponsored byVerisign