Herbal tea manufacturer Traditional Medicinals wanted to market a trademarked laxative tea product called Smooth Move at the website SmoothMove.com. In 2008, the California-based company tried to register the domain but discovered that the domain had already been claimed by WorldWide Media, an entity which had “parked” the domain with a website showing ads to visitors. Rather than rebrand its product or register a different domain, Traditional Medicinals initiated an arbitration proceeding against WorldWide Media asserting that the domain had been registered in bad faith.

An arbitration panel subsequently issued a decision in favor of Traditional Medicinals, citing WorldWide Media’s lack of actual business activity and its practice of registering and reselling other trademarked domain names. But when the arbitration panel gave WorldWide Media 10 days to initiate a transfer of the domain name, WorldWide Media opted to challenge the finding by filing a lawsuit in federal court. Today the lawsuit is still pending, and the disputed domain remains parked with a single-page website showing linked ads.

A Crowded Digital Marketplace

Domain disputes have become common in the increasingly crowded digital marketplace. Companies launching new brands or businesses often discover, in the course of trademark due diligence, that a first choice domain name has already been claimed by a competing venture or parked by an unknown entity. Likewise, established brands end up on the offensive, dedicating significant financial and legal resources to stamp out domain registrations that infringe on trademark rights. Microsoft Corporation, for example, has filed suits against several different companies in 2009 alone for domain name registrations that are identical or confusingly similar to Microsoft’s trademarks and service marks.

Some companies like Traditional Medicinals have the resources and financial incentives to fight for a preferred name, but others relegate themselves to second choice domain names that have not already been claimed. Domain name registration is a seemingly murky area of law governed by global intellectual property treaties, out-of-court arbitration procedures and trademark law. Even when a trademarked domain name has been registered by an entity, smaller businesses often abandon the possibility of reclaiming the name space because do not know how to enforce their rights.

ICANN and The Internet

A domain name is a series of letters and or numbers assigned to a particular Internet Protocol (IP) address, the series of numbers identifying the devices participating in a computer network. It is a comprehensible way to call up the information hosted on these devices which, when linked together and made accessible to the public, make up the Internet. Domain registrars such as GoDaddy, Register and 1&1 are companies authorized to handle domain name registrations by the Internet Corporation for Assigned Names and Numbers (ICANN), the organization with the authority to handle resolution of all domain name ownership issues for generic top-level domains (i.e., those ending in .com, .net, .org and .info).

Under ICANN rules, which were drafted with the support of the World Intellectual Property Organization, anyone registering a domain name must agree to be bound by policies outlined in the Uniform Dispute Resolution Policy (UDRP). This means that anyone who registers a top-level domain agrees to submit to arbitration, a form of out-of-court dispute resolution where a third party evaluates the facts in light of relevant law and imposes a legally binding decision. According to WIPO, ICANN’s arbitration policies were originally instituted to provide a means of resolving domain disputes that would be less expensive and faster than litigation. After an ICANN arbitration proceeding, the parties are still free to challenge the arbitrator’s decision. Nevertheless for all top-level domain name disputes, arbitration through an approved domain name dispute resolution service provider is a required first step.

Making The Case For Cybersquatting

According to the UDRP, anyone who registers or renews a top-level domain name must “represent and warrant” that the statements made in the registration agreement are complete and accurate, that the domain registration will not infringe on any third-party rights, that the purpose of the registration is not unlawful, and that the domain name will not be used in violation of any applicable laws or regulations. The UDRP explicitly puts the burden of determining “whether [the] domain name registration infringes or violates someone else’s rights” on the registrant. If a registrant fails to comply with UDRP regulations, ICANN has the authority to cancel, transfer or change the domain name registration.
In order to challenge the registration of a domain name, a company must first file an administration proceeding with ICANN. The filing must establish all the following: (1) the domain name is “identical or confusingly similar to a trademark or service mark” in which the company has rights, (2) the registrant has “no rights or legitimate interests” in the domain name and (3) the domain name has been registered and is being used in “bad faith.” Bad faith is a determination made by the arbitrator on the basis of several factors, which may include circumstances showing the domain was registered for the primary purpose of transferring it to another party for profit. Proof of bad faith may also include facts indicating the domain was registered to prevent the trademark owner from registering or registered in order to disrupt the business of a competitor. The arbitrator may also find bad faith where the domain was intentionally registered to attract users by creating a likelihood of confusion with an existing trademark.

To defend against a domain name challenge, the entity that registered the domain may respond by demonstrating rights to or legitimate interests in the domain name. The registrant can establish this by providing evidence of use or preparations to use the name in connection with a good faith offering of goods or services. Timing is critical here: the proof of use or preparation to use must precede notice of the domain dispute. Likewise, the registrant can establish that its company, entity or product is commonly recognized by the domain name or that it is making a legitimate non-commercial or fair use of the domain name. In order to establish non-commercial or fair use, the registrant must show that there was no intent to misleadingly divert customers or tarnish the trademark or service mark at issue for commercial gain. For example, the anonymous creator of a website criticizing Powermark Homes recently defended itself successfully against a challenge, even though the domain name contained the name of the Ohio-based homebuilder.

Post-Arbitration Remedies

An arbitrator’s decision is binding unless either one of the parties decides to litigate the matter in court. If the party challenges the arbitrator’s decision on the basis of trademark or copyright, the case may be brought in federal court. It may also be possible to bring a challenge under the federal Anticybersquatting Consumer Protection Act (ACPA), which provides remedies against a defendant who has “bad faith intent to profit from a mark” and “registers, traffics in, or uses a domain name that” is at the time of registration identical or similar to another trademark. A plaintiff may solidify the case for bad faith intent to profit by showing that the registrant offered to transfer or the domain consideration, or by intentionally providing misleading contact information to the domain name registrar.

Litigation is costly in comparison with arbitration, but can yield remedies in addition to domain name cancellation, such as statutory damages up to $100,000 and attorneys fees. WorldWide Media, for example, is not only seeking declaratory relief to establish that SmoothMove.com does not infringe Traditional Medicinals’ trademark rights, but also payment of legal fees associated with the case. It is worth noting that in the United States, trademark protection disappears if the owner of a mark fails to adequately protect it against infringement. Since the onus of defending a trademark falls on the mark’s owner, a company may have incentives beyond branding and marketing to pursue a domain name of choice.

-By Dava Casoni, Annie Lin