IPC SYNOPSIS PAPER ON THE TRADEMARK CYBERPIRACY PREVENTION ACT

In November, 1999, the two houses of the U.S. Congress submitted to the President the Intellectual Property and Communications Reform Act of 1999. President William Jefferson Clinton signed the legislation on November 29, 1999. Title III of the Bill is entitled "Trademark Cyberpiracy Prevention", and adds a new Section 43(d) to the U.S. Trademark Act of 1946, 15 U.S.C. § 1125(d). The act also, inter alia, made corresponding revisions to Sections 32 and 45 of the Trademark Act, 15 U.S.C. §§ 1114 and 1127. What follows is a synopsis of the legislative history of the Trademark Cyberpiracy Prevention Act ("TCPA"), followed by an executive summary of the new statute, and concludes with cases reported to date under the new cybersquatting prevention law.

I. LEGISLATIVE HISTORY

A. Senate Legislative History: The Anticybersquatting Consumer Protection Act

Procedural History. On June 21, 1999, Senator Abraham introduced S. 1255 as the "Anticybersquatting Consumer Protection Act." The bill was cosponsored by Senators Torricelli, Hatch, McCain, and Breaux. A hearing was held by the Judiciary Committee on July 22, 1999. The Committee heard testimony from Anne H. Chasser, president of International Trademark Association; Gregory D. Phillips, a trademark practitioner with Howard, Phillips & Anderson in Salt Lake City, Utah; and Christopher D. Young, president and chief operating officer of Cyveillance, Inc.

On July 29, 1999 the Judiciary Committee met in executive session to consider the bill. The Chairman, Senator Hatch, and Ranking Member, Senator Leahy, offered an amendment in the nature of a substitute, which was cosponsored by Senators Abraham, Torricelli, DeWine, Kohl, and Schumer, and which reflected the text of S. 1462, introduced the same day by the Chairman and the Ranking Member, with the same Senators listed as cosponsors. The substitute amendment was considered and agreed to by unanimous consent. The bill, as amended, was then ordered favorably reported to the Senate by unanimous consent.

Title III (the "Anticybersquatting Consumer Protection Act") of S. 1948 (The Intellectual Property and Communications Omnibus Reform Act of 1999), was folded into the omnibus appropriations package (H.R. 3194) that became P.L. 106- 113.

Primary Evils of Cybersquatting. In S. 1255, The Anticybersquatting Consumer Protection Act. (Referred in House), Congress found:

(1) The registration, trafficking in, or use of a domain name that is identical to, confusingly similar to, or dilutive of a trademark or service mark of another that is distinctive at the time of registration of the domain name, without regard to the goods or services of the parties, with the bad-faith intent to profit from the goodwill of another’s mark (commonly referred to as ‘cyberpiracy’ and ‘cybersquatting’) --

(A) results in consumer fraud and public confusion as to the true source or sponsorship of goods and services;
(B) impairs electronic commerce,
(C) deprives legitimate trademark owners of substantial revenues and consumer goodwill; and
(D) places unreasonable, intolerable, and overwhelming burdens on trademark owners in protecting their valuable trademarks.

(2) Amendments to the Trademark Act of 1946 would clarify the rights of a trademark owner to provide for adequate remedies and to deter cyberpiracy and cybersquatting.

Note that unlike the traditional view of a domain name as a "mere address" not to be accorded trademark status, these findings of the Senate clearly suggests that domain names are to be treated as trademarks. The stated purpose of the bill "is to protect consumers and American businesses, to promote the growth of online commerce, and to provide clarity in the law for trademark owners by prohibiting the bad-faith and abusive registration of distinctive marks as Internet domain names with the intent to profit from the goodwill associated with such marks--a practice commonly referred to as cybersquatting."

Why Cyberpiracy? Testifying before the Senate Judiciary Committee, Anne H. Chasser, President of the International Trademark Association (ITNA) had found that "cybersquatting" takes place for a number of reasons, including the following:

To extract payment from the rightful owner of the mark. INTA noted that these are the most prevalent cases, since it takes only $70 to register a domain name with Network Solutions, Inc. (the registration authority for .com, .net, and .org), and the potential financial windfall (should a trademark owner opt to purchase the domain) is much greater. As an example, Warner Bros. was offered warner-records.com; warner-bros-records.com; warner-pictures.com; warner-bros-pictures; and warnerpictures.com for the selling price of $350,000. Another cybersquatter offered to sell to Warner Bros. 15 domain names, including bugsbunny.net and daffyduck.net.

To offer the domain name for sale publicly to third parties. As an example, The University of California at Los Angeles (commonly referred to as "UCLA"), took action against a cybersquatter who registered www.ucla.com and then put up a "for sale" sign with a number to call. Shortly after counsel for UCLA sent a letter to the cybersquatter, it became a pornographic site. The party operating the pornographic site was found to have several addresses and phone numbers, none of which were legitimate.

To use famous marks as domain names for pornographic sites or otherwise capitalizes on customer confusion. For example, the Mobil Oil Corporation reports that its trademark, MOBIL 1, was used in a domain name to direct Web surfers to a pornographic site. The domain name was mobil1.com.

To engage in consumer fraud, including counterfeiting activities. For example, AT&T reports that a cybersquatter registered the domain names attphonecard.com and attcallingcard.com and established a Web site soliciting credit card information from consumers. AT&T was concerned because its brand name was being used to lure consumers to a Web site that might be used fraudulently to obtain financial information from unsuspecting consumers.

How Network Solutions Handled the Problem In the Past. Mr. Michael A. Daniels, Chairman of the Board of Network Solutions, explained to Congress how domain name disputes were handled prior to the passage of The Anticybersquatting Consumer Protection Act:

The Policy provides that, if an owner of a federally registered trademark provides to Network Solutions a certified copy of its "valid and subsisting" federally registered trademark, and that trademark is identical to a registered domain name, then Network Solutions will send a letter to the domain name registrant offering the registrant certain options.

Option 1. Wait for Court Order. As one option, the registrant may provide Network Solutions with a certified copy of its own trademark registration, in which event the registrant may continue to use the domain name until Network Solutions receives a court order directing otherwise.

Option 2. Voluntary Transfer. A second option permits the registrant to transfer the domain name to the trademark owner.

Option 3. No One Uses Domain Name, New Name. A third option allows the registrant to create a new domain name, registered without cost, to be used for ninety days in conjunction with the disputed domain name. After the expiration of the ninety-day period, the allegedly infringing domain name would be placed on "hold" status so that no one could use that domain name until resolution of the dispute between the domain name registrant and the trademark owner.

Option 4. No One Uses Domain Name, No New Name. Fourth, the registrant may refuse to transfer the domain name or to create a new name. In that event, the domain name is placed on "hold" status and no one is permitted to use the name.

Option 5. Declaratory Judgment. Finally, a domain name holder who has been threatened by a trademark owner can sue the trademark owner for declaratory judgment concerning their registration of the domain name.

Testimony of Michael A. Daniels, Chairman of the Board of Directors, Network Solutions, Inc., Before the Subcommittee on Courts and Intellectual Property Committee on the Judiciary U.s. House of Representatives.

Trademarks in Cyberspace--A Heightened Invitation to Fraud. Sen. Hatch noted the additional problems of trademarks in cyberspace as opposed to the conventional setting. He noted that "the problems of brand-name abuse and consumer confusion are particularly acute in the online environment." Sen. Orin Hatch, Statement of Introduced Bills and Joint Resolutions, Domain Name Piracy Prevention Act of July 29, 1999.  Sen. Hatch observed that a consumer in a "brick and mortar" world has the luxury of a variety of additional indicators of source and quality aside from a brand name. For example, when one walks in to the local consumer electronics retailer, he is fairly certain with whom he is dealing, and he can often tell by looking at the products and even the storefront itself whether or not he is dealing with a reputable establishment. He further noted that these protections are largely absent in the electronic world, where anyone with Internet access and minimal computer knowledge can set up a storefront online.
Senator Hatch lamented that "In many cases what consumers see when they log on to a site is their only indication of source and authenticity, and legitimate and illegitimate sites may be indistinguishable in cyberspace. In fact, a well-known trademark in a domain name may be the primary source indicator for the online consumer. So if a bad actor is using that name, rather than the trademark owner, an online consumer is at serious risk of being defrauded, or at the very least confused." Senator Hatch noted that this leads to the erosion of consumer confidence in electronic commerce and destroys the value of brand name identifiers.

B. Synopsis of House Report 106-412 on The Trademark Cyberpiracy Prevention Act

Legislative History. As reported by the Judiciary Committee of the House of Representatives on October 25, 1999, the Act was known as the Trademark Cyberpiracy Prevention Act. It would impose civil liability on any person having a bad faith intent to profit from a trademark or service mark owned by another, that the person registered, trafficked in or used as a domain name if the domain name was identical or confusingly similar to the mark owned by the other person, if the domain name dilutes a famous mark, or if it was a trademark, word or name protected by 18 U.S.C. § 706 (protecting the sign of the American Red Cross) or 36 U.S.C. § 2205.

The purpose of the Act was to remedy problems faced by owners of famous marks when dealing with the issue of domain names. The House was concerned expressly with cybersquatters who register numerous domain names containing American trademarks or trade names only to hold them ransom in exchange for money. The report likewise criticized the practice of cyber-squatters posting pornographic materials on their sites as leverage to increase the likelihood of collecting payment for the domain name by damaging the integrity of the mark.

Companies doing business on-line typically want domain names that are easy to remember and that relate to their products, trade names and trademarks. Cybersquatters were exploiting this fact by registering as domain names trademarks of other companies. Many of these cyber-squatters or cyberpirates have no intention of using the domain name in commerce and instead attempt to exact money from the company in exchange for domain names that relate to the company’s trademarks.

The Subcommittee on Courts and Intellectual Property recognized that though Network Solutions, Inc. ("NSI") maintained a domain name dispute policy, that policy had been criticized by intellectual property owners because it could only redress domain name infringement claims by trademark owners whose registered trademarks were identical to the disputed domain name. This meant that NSI would not act on complaints from parties that had Federal registrations on the Supplemental Register, had state trademark registrations or had only common law trademark rights or rights under § 43(a) of the Lanham Act. The NSI policy also did not redress confusingly similar, but non-identical, domain names. The Subcommittee felt that the NSI dispute resolution policy was inadequate to redress cyberpiracy by those who sought to extort profits by reserving Internet domain names that are similar or identical to trademark names with no intention of using the names in commerce themselves.

Not only could cyberpiracy undermine consumer confidence, but it would discourage consumer use of the Internet and destroy the value of brand names and trademarks of American businesses. Cyberpiracy can hurt businesses in several ways. By expropriating another’s trademark as part of a domain name, it prevents the trademark owner from using the mark as part of its domain name and thereby diverts business from the trademark owner. Cyberpiracy likewise blurs the distinctive quality of the mark and, when linked to certain negative activities such as pornography, can tarnish the mark. Finally, trademark owners are required to police and enforce their trademark rights by preventing unauthorized use or they can risk losing those rights entirely.

The Act sought to resolve some of the uncertainty inherent in trademark owners seeking to redress cyberpiracy in federal court. Though the courts generally find in favor of a trademark owner where similar or identical domain names were used actively in connection with the cyberpirate’s web site, the law was less settled where a cyberpirate merely registered a domain name and had not commenced using it. Moreover, the Act recognized that even if the trademark owner ultimately succeeded in litigation, the significant resources and inherent delay associated with filing suit in federal court to validate their rights could be burdensome. As a result, many companies simply chose to pay extortionist prices to cyberpirates in order to rid themselves of potentially damaging litigation with an uncertain outcome. The Report expressly mentions that the American computer company, Gateway 2000, had recently paid $100,000 to a cyberpirate who had placed pornographic images on a web site at the URL, www.gateway2000.com.

Accordingly, the Trademark Cyberpiracy Prevention Act sought to prevent the practice of cybersquatting by providing specific amendments to the Trademark Act tailored to holding cyberpirates liable for registering, trafficking in, or using domain names that were identical or substantially similar to the trademarks or service marks of another.

Section 2(a) of the Act added a new section 43(d) to the Trademark Act providing an explicit trademark remedy for cyberpiracy. Section 43(d)(1)(A) made it actionable to register, traffic in or use a domain name that is identical to, confusingly similar to, or dilutive of the trademark or service mark of another, provided that the mark was distinctive at the time the domain name was registered. But a plaintiff must demonstrate that the defendant registered, trafficked in, or used the offending domain name with the bad-faith intent to profit from the goodwill of a mark belonging to someone else. So the bill did not redress innocent domain name registrations by persons who are unaware of the trademark owner’s mark or by persons who, though aware of the mark, lack a bad faith intent to profit from the goodwill associated with the mark.

Section 43(d)(1)(B) states eleven nonexclusive factors for a court to consider in determining whether the required bad faith element exists:

(i) the trademark or other intellectual property rights of the person, if any, in the domain name;

(ii) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;

(iii) the person’s prior lawful use, if any, of the domain name in connection with the bona fide offering of any goods or services;

(iv) the person’s lawful noncommercial or fair use of the mark in a site accessible under the domain name;

(v) the person’s intent to divert consumers from the mark owner’s online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;

(vi) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services;

(vii) the person’s provision of material and misleading false contact information when applying for the registration of the domain name or the person’s intentional failure to maintain accurate contact information;

(viii) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to trademarks or service marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous trademarks or service marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of such persons;

(ix) the person’s history of offering to transfer, sell or otherwise assign domain names incorporating marks of others to the mark owners or any third party for consideration without having used, or having an intent to use, the domain names in the bona fide offering of any goods and services;

(x) the person’s history of providing material and misleading false contact information when applying for the registration of other domain names which incorporate marks, or the person’s history of using aliases in the registration of domain names which incorporate marks of others; and

(xi) the extent to which the trademark or service mark incorporated in the person’s domain name registration is distinctive and famous within the meaning of subsection (c)(1) of section 43 of the Trademark Act of 1946 (15 U.S.C. 1125).

The factors were intended to balance the rights of the trademark owner with those of legitimate interests of trademark users and others, who seek to lawfully use another’s mark for purposes such as comparative advertising, comment, criticism, parody, news reporting, fair use, and the like. The first four of the factors may tend to indicate an absence of bad faith, while the remainder of them indicate its presence.

Section 43(d)(1)(C) would provide that, in any anticybersquatting action brought under new Section 43(d), a court can order forfeiture, cancellation, or transfer of the domain name to the owner of the mark. Section 43(d)(1)(D) clarifies that a use of a domain name is limited to a use of the name by a registrant or its authorized licensee.

Significantly, Section 43(d)(2)(A) provided for in rem jurisdiction, which allowing a mark owner to seek the forfeiture, cancellation, or transfer of an infringing domain name by filing an in rem action against the domain name itself. In rem jurisdiction would be limited to when the mark owner satisfies the court that it has exercised due diligence in trying to locate the owner of the domain name but was unable to do so. In rem jurisdiction is appropriate in two basic circumstances. First, it is appropriate where the mark owner has exercised due diligence in trying to locate the owner of a domain name but is unable to do so or is unable to affect service because the registrant either has registered the name under an alias or has used false or misleading contact information. Second, in rem jurisdiction is appropriate where personal jurisdiction cannot be established over the registrant of the domain name because the registrant is a non-U.S. resident. Of course, this type of in rem jurisdiction would still require some nexus with the U.S., such as use of a U.S. registry or registrar, so as not to offend international comity.  The House Report noted that this type of in rem jurisdiction would not offend due process, because only the property would be subject to jurisdiction, and not other substantive rights of the domain name registrant. The remedies available in any in rem action against a domain name are in addition to any other civil remedy that otherwise applies.

Section 3 of the proposed Act, addressing damages and remedies, applied traditional trademark remedies, including injunctive relief, recovery of a defendant’s profits, actual damages, and costs, to cyberpiracy cases under new Section 43(d). It likewise would amend Section 35 of the Trademark Act to provide for statutory damages in cyberpiracy cases, in lieu of actual damages and profits, in an amount of not less than $1,000 and not more than $100,000 per domain name, as the court deems just. However, the proposed Act would require the court to remit statutory damages in any case where the "infringer believed and had reasonable grounds to believe that the use of the domain name was a fair or otherwise lawful use."

The proposed Act amended Section 32(2) of the Trademark Act to extend existing limitations on liability to cyberpiracy cases. New Section 32(2)(D) would encourage domain name registrars and registries to work with trademark owners to prevent cyberpiracy through a limited exception from liability for domain name registrars and registries that suspend, cancel or transfer domain names pursuant to a court order or in the implementation of a reasonable policy prohibiting cybersquatting. Such a reasonable policy would apply only to marks registered on the Principal Register of the U.S. Patent and Trademark Office in order to promote objective criteria and predictability in the dispute resolution process.

Section 32(2) would also protect domain name registrants from overly aggressive trademark owners. A new Section 32(2)(D)(iv) would make a trademark owner liable for damages resulting from the suspension, cancellation, or transfer of the domain name, if the trademark owner knowingly and materially misrepresents to the domain name registrar or registry that a domain name is infringing. In addition, a court may order the reactivation of the domain name or the transfer of the domain name back to the domain name registrant. Furthermore, Section 32(2)(D)(iii) would codify current case law limiting the secondary liability of domain name registrars and registries for the act of registration of a domain name, absent bad-faith on their part.

A savings clause in the Section 6 of the proposed Act, made clear that the bill would not affect traditional trademark defenses, such as fair use, or a person’s first amendment rights.

Finally, the House Report contemplated that the Act would apply to all domain names registered before, on or after the date of enactment. However, the availability of statutory damages shall not apply to any registration, trafficking, or use of a domain name that took place prior to enactment.

C. Synopsis of Conference Report: Trademark Cyberpiracy Prevention Act

Section 3002. Cyberpiracy Prevention

As provided by Subsection (a), to be protected under the Act, a mark must have been, at the time the domain name was registered, either (1) "distinctive (i.e., enjoyed trademark status)" if the domain name is identical or confusingly similar to a mark, or (2) was famous, in the case of dilution.

There also must be a showing of bad faith intent to profit from goodwill associated with the mark.

Section 43(d), Paragraph (1)(B)(i), provides a list of nonexclusive, nonexhaustive factors which may be used by a court in determining whether the required bad-faith element exists in a particular case.

Subparagraph (I) recognizes the existence of concurrent use rights of a party who has acquired rights from a non-infringing use of the mark. Example given: Delta Airlines and Delta Faucets.

Subparagraph (II) provides that a court may take into account whether a domain name is a legitimate legal name or nickname of the domain registrant in assessing the issue of bad faith.

Subparagraph (III) indicates that an indication of the absence of bad faith can be found from use of the domain name in commerce without creating a likelihood of confusion where they has been no attempt to use the name in order to profit from the goodwill of the trademark owner’s name.

Subparagraph (IV) does not overrule Panavision v. Toeppen, 141 F.3d 1316 (9th Cir. 1998) or existing trademark law with respect to the relationship between First Amendment protections and the rights of trademark owners, but does give courts the ability to take into consideration the noncommercial and uses of other’s marks in evaluating whether the name was registered or used in good faith.

Subparagraph (V) allows a court to consider as evidence of bad faith that a domain name registrant intended to confuse or deceive the public in diverting consumers away from the trademark owner’s website to a website that could harm the goodwill of the mark by creating a likelihood as to confusion as to the source, sponsorship, affiliation, or endorsement of the site.

Subparagraph (VI) gives courts the ability to consider the motives of a domain registrant (who did not used the domain name in a bona fide offering of goods or services and did not intend to do so) in offering to transfer, sell or assign the domain name to the trademark owner or third parties for financial gain, or prior conduct indicating a pattern of acts, as an indicator of bad faith. However, this is not intended to suggest that the mere offer to sell a domain name or the mere failure to use the domain name in a bona fide offering of goods or services, by itself, indicates bad faith.

Subparagraph (VII) indicates that a domain name registrant’s intentional giving of material and misleading contact information in the domain name registration, the intentional failure to maintain accurate contact information, or a prior pattern of such conduct, can be taken into consideration in evaluating the question of whether bad faith exists. However, the mere fact the information is false, per se, is not evidence of bad faith, and even if the false information was given intentionally, the court can determine that there was a legitimate reason for doing so.

Subparagraph (VIII) permits courts to consider the warehousing of multiple domain names that mirror the trademarks of others or which are confusingly similar or dilutive of the trademarks of others in determining the existence of bad faith without suggesting that the mere registration of multiple domain names is an indication of bad faith by itself.

Subparagraph (IX) allows courts to use a sliding scale whereby, the more famous and distinctive the mark, the more likely that bad faith exists, while the less distinctive and less well-known a mark is, the less likely that the requisite bad faith exists.

Section 43(d), Paragraph (2)(A), permits the mark owner to seek forfeiture, cancellation or transfer of an infringing domain name in an in rem action against the domain name itself when the mark owner is unable to proceed against the registrant despite due diligence in trying to locate the registrant or where the mark owner cannot obtain personal jurisdiction over the domain name registrant. Due diligence is deemed to have been exercised by the mark owner if notice of the alleged violation and intent to proceed to the domain name registrant at the postal and e-mail address provided by the registrant to the registrar and publishes notice of the action as the court may direct promptly after filing of the action; such acts are deemed service of process by paragraph (2)(B).

Section 43(d), Paragraph (2)(C), provides for in rem actions to be brought in the judicial district in which (1) the domain name registrar, registry or other domain name authority that registered or assigned the domain name is located, or (2) documents sufficient to establish control and authority regarding disposition of the registration and use of the domain name are deposited with the court.

Section 43(d), Paragraph (2)(D), limits relief to forfeiture, cancellation or transfer of an infringing domain name. Upon receipt of written notice of the complaint, the domain name registrar, registry or other domain name authority that registered or assigned the domain name is required to turn over to the courts documents sufficient to establish control and authority regarding disposition of the registration and use of the domain name, and may not transfer, suspend, or otherwise modify the domain name during the pendency of the action, except as ordered by the court. The domain name registrar, registry or other domain name authority is immune from injunctive or monetary relief in such action except in the case of bad faith or reckless disregard, which includes failure to comply with any court order.

Paragraph (3) makes it clear that actions and remedies under new section 43(d) are in addition to, and not instead of, any other actions or remedies that may available. Further, the creation of new section 43(d) does not limit the application of current provisions of trademark, unfair competition and false advertising, or dilution law, or other remedies under counterfeiting or other statutes, to cybersquatting cases.

Paragraph (4) makes it clear that in rem jurisdiction under the act is in addition to any other jurisdiction that may exist.

Subsection (b) prohibits registration of a domain name that is the name of a living person, or is substantially and confusingly similar thereto without that person’s consent if the registrant’s specific intent is to profit from the domain name by selling it for financial gain. This provision applies to the registration of full names, appellations, and variations, but does not prohibit registration of a domain name in good faith by the owner of a work of authorship and sale of the domain name in conjunction with the lawful exploitation of the work; and recognizes First Amendment protections by exempting works of expression. However, this subsection does not create a right of publicity of any kind with respect to domain names, nor is it intended to create any new property rights, intellectual or otherwise, in a domain name that is the name of a person.

This subsection only applies to domain names registered on or after the date of enactment of the Act. No monetary damages, but costs and attorney’s fees may be awarded to prevailing party in appropriate cases.

Section 3003. Damages and Remedies

This section applies traditional trademark remedies, including injunctive relief, recovery of defendant’s profits, actual damages, and costs to cybersquatting cases. It also provides statutory damages in cybersquatting cases of not less than $1,000 and not more than $100,000 per domain name as the court deems just.

Section 3004. Limitation on Liability

This section extends the limitations on liability of section 32(2) to cybersquatting cases, and creates a new subparagraph (D) to encourage registrars and registries to work with trademark owners to prevent cybersquatting through a limited exemption from liability for domain name registrars and registries that suspend, cancel or transfer domain names pursuant to court order or in the implementation of a reasonable policy prohibiting cybersquatting, and from injunctive relief where the domain name registrar, registry or other domain name authority that registered or assigned the domain name has turned over documents sufficient to establish control and authority regarding disposition of the registration and use of the domain name to a court in which an action has been filed regarding disposition of the name, and has not transferred, suspended, or otherwise modified the domain name during the pendency of the action, except as ordered by the court.

This section also protects domain name registrants from overreaching by trademark owners via a new subparagraph (D)(iv) in section 32(2), which makes a trademark owner who knowingly and materially misrepresents to the domain name registrar or registry that a domain name is infringing liable for damages resulting from suspension, cancellation or transfer of the domain name. Also, a court may order reactivation of the domain name or transfer of the domain name back to the domain name registrant. Subparagraph (D)(iii) codifies current case law limiting the secondary liability of domain name registrars and registries for the act of registration of a domain name in good faith.

Subparagraph (D)(v) allows a domain name registrant whose domain name has been suspended, canceled or transferred to file a civil action to establish that registration or use of the domain name is not a violation of the Lanham Act. In such cases a court can grant injunctive relief including reactivation of the domain name or transfer of the domain name back to the domain name registrant.

Section 3005. Definitions

This section defines "Internet" in a manner consistent with the Communications Act (47 U.S.C. 230(f)(1)) and narrowly defines "domain name" to exclude screen names, file names, and other identifiers not assigned by a domain name registry or registrar.

Section 3006. Study on Abusive Domain Name Registrations Involving Personal Names

This section directs the Secretary of Commerce, in consultation with the Patent and Trademark Office and the Federal Election Commission, to conduct a study and report to Congress with recommendations, guidelines and procedures for resolving disputes involving registration of domain names that include personal names of others or names that are confusingly similar thereto, and further directs the Secretary of Commerce to collaborate with ICANN (Internet Corporation for Assigned Names and Numbers) to develop guidelines and procedures for resolving disputes involving registration of domain names that include personal names of others or names that are confusingly similar thereto.

Section 3007. Historic Preservation

This section provides limited immunity from suit under trademark law for historic buildings that are on or eligible for inclusion on the National Register of Historic Places, or that are designated as an individual landmark or as a contributing building in a historic district.

Section 3008. Savings Clause

This section makes it clear that the Act does not affect traditional trademark defenses, such as fair use, or a person’s first amendment rights.

Section 3009. Effective Date

This section provides that the Act does not apply to the registration, trafficking or use of a domain name that took place prior to enactment of the Act.

II. EXECUTIVE SUMMARY OF THE LEGISLATION

The U.S. Trademark Cyberpiracy Prevention Act, designed to prevent the bad faith registration of trademarks as domain names, adds new Section 43(d) to the Lanham (Trademark) Act, creating a civil cause of action against a person who, with a 'bad faith intent" to profit from another’s mark or personal name, "registers, trafficks in, or uses a domain name" that is "identical or confusingly similar" to that mark. The Act lists nine non-exclusive factors that a court may consider in determining whether the registrant has the requisite bad faith intent, including the registrant’s provision of false or misleading contact information in applying for registration or failure to maintain accurate contact information.

The mark must be distinctive or famous at the time of registration of the domain name. Liability under the Act can be imposed without regard to the goods or services of the parties.

Highlights of the legislation include: introduction of uniform federal rules supplementing existing trademark law; the availability of a civil action against a cybersquatter or warehouser; statutory damages of $1,000 - $100,000 per "domain name identifier" at the claimant’s election; and "substantial protection" for the innocent domain name holder in appropriate cases. Prior to this legislation, it was not clear that the abusive registration of a domain name, without more, constituted the "commercial use" required under federal law to create liability for trademark infringement. No clear guidance previously had existed, either judge-made or legislatively-made, as to how to treat a cybersquatter who reserved an Internet domain name with no intention of using that name.  The Act specifically provides for liability against a "mere registration", provided that there is evidence of a bad faith intent to profit from that registration.

The legislation also provides for an in rem action against the domain name itself. The addition of in rem jurisdiction addresses the 1999 Porsche decision, in which Porsche had brought suit against 138 domain names, a novel legal strategy. (In many of the domain name registrations, the contact information was false.) The U.S. District Court for the Eastern District of Virginia dismissed the suit, holding that Porsche must sue the individual domain name holders, not the infringing names themselves.  Under the Act, a plaintiff can obtain in rem jurisdiction by filing an action against the domain name itself, but only if the domain name registrant cannot be located or if in personam jurisdiction over the registrant is not available. Remedies in such cases are limited to the forfeiture or cancellation of the domain name or the transfer of the domain name to the trademark owners and do not include monetary damages, costs or attorney’s fees. In rem jurisdiction is available in the judicial district where the domain name registry or registrar is located or where documents sufficient to establish control and authority regarding the disposition of the registration are deposited.

The Act also protects against registration of a living person’s name as a domain name, or a name "substantially and confusingly similar" thereto, with the specific intent to profit from the name by selling it to the person or a third party. A domain name registrant who registers another’s name is not liable under the Act, however, if the name is "used in, affiliated with, or related to a work of authorship" including a work for hire"." The exception requires that the registrant register the domain name in good faith, be the copyright owner or licensee of the work, and intend to sell the domain name in conjunction with the lawful exploitation of the work. In addition, the registrant cannot be prohibited by contract with the named person from registering the name as a domain name. The Act also requires the Department of Commerce to study the personal names issue and deliver a report to Congress by June 2000 and to collaborate with ICANN in developing guidelines and procedures for resolving such disputes.

The Act applies to all domain names registered before, on or after the date of the enactment of the Act, except that the Act’s protection against registration of a living person’s name applies only to domain names registered on or after the date of the enactment of the Act. Also, damages are not available with respect to the registration, trafficking or use of a domain name that occurs before the date of the enactment of the Act. Trademark owners in the U.S. generally favor the Act and others outside the U.S. are viewing the Act as a possible model for enacting legislation within their own countries. Other members of the Internet community, however, have expressed concern that the Act may lead to a "patchwork quilt" of varying legislative models among the countries or may undermine ICANN’s Uniform Dispute Resolution Policy ("UDRP"), which commenced operation on December 1, 1999.

Before passage of the new Act, owners of trademarks faced a difficult, expensive and frustrating ordeal simply to protect what they legally owned.  Registrants of domain names with Network Solutions, Inc. ("NSI"), were not then (and are still not) required to demonstrate ownership of a trademark registration prior to registration of the domain name. NSI's dispute resolution process, in place since 1995, had been attacked as being ineffectual and slow. For example, an owner of a registered trademark had to demonstrate that its registered mark was identical to the domain name in dispute before NSI's dispute resolution process could even be invoked.

The lack of competent statutory protection meant that "cyberpirates" or "cybersquatters" were relatively free to reserve Internet domain names that infringed on registered trademarks. Stories abound of individuals registering the domain names of famous businesses and then holding that business up for large amounts of money to buy back what the business already owned. Although in recent years the courts had been more sophisticated in their understanding of how infringing domain names on the Internet can dilute a registered trademark, the law had remained inconsistent in its application. It is hoped that the new legislation will bring consistency to this area of the law.

III. ACTIONS BROUGHT UNDER THE TRADEMARK CYBERSQUATTING PREVENTION ACT ("TCPA")

A. First Appellate Decision Applying the TCPA

The first appellate decision applying the TCPA was rendered on February 2, 2000, by the United States Court of Appeals for the Second Circuit in Sporty?s Farm, LLC v. Sportsman?s Market, Inc, No. 98-7452(L), 2000 WL 124389 (2nd Cir. Feb. 2, 2000).

Plaintiff, Sportsman?s Market (?Sportmans?) began using the mark ?sporty? in connection with its aviation products catalog business since the 1960s, and in 1985, registered ?sporty?s? as a trademark. Defendant, Omega Engineering, Inc. (?Omega?), is a mail order catalog company that sold mostly scientific instruments until the mid-1990s, when it entered the aviation catalog business in competition with Sportmans. In 1996, nine months after registering the domain name, <sportys.com>, Omega formed Sporty?s Farm as a wholly-owned subsidiary and sold it the rights to <sportys.com>. Sporty?s Farm used <sportys.com> in connection with a web site that sold Christmas trees.

The court stated that ?it is clear that the new law was adopted specifically to provide courts with a preferable alternative to stretching federal dilution law when dealing with cybersquatting cases.? Sporty?s Farm, 2000 WL 124389, at *6. The case at the district court level (see Sporty?s Farm v. Sportsman?s Market, No. 96CV0756 (D. Conn. Mar. 13, 1998) was decided under the Federal Trademark Dilution Act because the TCPA was at that time not yet enacted.

The court first found the ?sporty?s? mark was entitled to TCPA protection because it is an inherently distinctive mark, as statutorily required. Next, the court found <sportys.com> is confusingly similar to the Sportsman?s sporty?s mark. In this regard, the court cited Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1055 (9th Cir. 1999), which discussed the ?inconsequential differences between the mark ?MovieBuff? and the domain name <moviebuff.com>. See Sporty?s Farm, 2000 WL 124389, at *7. The court then analyzed what lies at the heart of the TCPA?whether defendant Sporty?s Farm acted with the statutorily required ?bad faith intent to profit? from the sporty?s mark. In finding that the defendant did possess the requisite bad faith, the court applied several of the nine illustrative statutory factors.  Before undertaking this analysis, the court noted the illustrative nature of the nine factors enumerated in the TCPA and stated that it was not entitled to consider other facts in conjunction with the statutory factors.

In applying the statutory factors, the court first found that ?neither Sporty?s Farm nor [its parent entity] Omega had any intellectual property rights in sportys.com at the time Omega registered the domain name.? Id. The court noted that ?Sporty?s Farm was not formed until nine months after the domain name was registered, and it did not begin operations or obtain the domain name from Omega until after this lawsuit was filed.? Id. Next, the court found that ?the domain name does not consist of the legal name of the party that registered it, Omega.? Id. The court then found that the third factor concerning the ?prior use of the domain name in connection with the bona fide offering of any goods or services, also cuts against Sporty?s Farm since it did not use the site until after this litigation began, undermining its claim that the offering of Christmas tress on the site was in good faith.? Id., at *8. Sporty?s Farm also failed to alleviate bad faith under the fourth factor, which recognizes noncommercial or fair use of a mark. The court also found that ?Omega sold the mark to Sporty?s Farm under suspicious circumstances.? Id. Moreover, the court found that ?Omega registered sportys.com for the primary purpose of keeping Sportsman'? from using that domain name. Id. On this account, the court elaborated on Omega?s conduct.

Several months later, and after this lawsuit was filed, Omega created another company in an unrelated business that received the name Sporty?s Farm so that it could (1) use the sportys.com domain name in some commercial fashion, (2) keep the name away from Sportsman?s, and (3) protect itself in the event that Sportsman?s brought an infringement claim alleging that a ?likelihood of confusion? had been created by Omega?s version of cybersquatting.

Id.
The Second Circuit affirmed the district court?s grant of injunctive relief. The court found, however, that the company was not entitled to actual damages and profits or statutory damages. This result was statutorily mandated because <sportys.com> was registered prior to the TCPA?s effective date. See Pub. L. No. 106-113, ? 3010 (stating that damages are not ?available with respect to the registration, trafficking, or use of a domain name that occurs before the date of the enactment of this Act.?).

B. Actions Brought Under the TCPA

1. Non-personal Domain Names

? The National Football League (?NFL?) filed one of the first lawsuits under the TCPA. The NFL asserts that web sites operated by the California defendant violates its rights under the TCPA and infringes upon its trademarks and copyrights. The defendant operates three web sites with domain names that incorporate NFL marks: <NFLToday.com>, <NFLToday.net> and <NFLToday.org>. Each of these sites provides access to the same content. The defendant claims that he did not act in bad faith as he is an avid football fan and his web sites function much like online publications offering news information and opinions. However, the defendant offers gambling selections on NFL games, charging for such services.  Accordingly, the NFL asserts that the defendant is appropriating the league?s trademarks in order to profit and thus acted in bad faith and violated the TCPA.

? In mid-January 2000, New England sporting goods retailer MVP Sports Stores, Inc. (?MVP Sports?) sued MVP.com, Inc., a Web-based sporting goods company launched in December by athletic icons Michael Jordan, John Elway and Wayne Gretzky in joint venture with CBS Corp. and a venture capital firm. MVP Sports, in operation since 1984, is a Wilmington, Delaware-based retailer with 19 stores in four New England states. MVP Sports registered two of its trademarks, ?MVP? and ?MVP Sporting Goods? in Massachusetts, but not federally. MVP Sports registered the domain name <mvp-sports.com> in May 1997. The company currently uses its web site for informational purposes only, but intends to sell goods online. MVP.com registered its domain name, <mvp.com>, in December 1999, and began direct online sales in January. MVP Sports alleges cyberpiracy, unfair competition and trademark dilution in that MVP.com will be competing directly with MVP Sports using a domain name that is confusingly similar to its trademark and acted in bad faith in doing so.

? On December 6, 1999, auction web site company Bargain Bid filed suit against a competitor and two others in the Eastern District of New York. Bargain Bid owns the trademark ?bargainbid? and sells computer-related goods by auction on its web site located at <bargainbid.com>. Defendant Ubid also sells computer-related equipment over the Internet. Defendant Perry Belcher is a member of Ubid?s affiliate program, which pays domain name registrants a fee for bringing visitors to the Ubid site.  Belcher registered the domain name, <barginbid.com> for its affiliate program web site. The lawsuit included the hosting company as a third defendant.

Bargain Bid alleges that Belcher acted in bad faith by intentionally diverting consumers away from Bargain Bid?s site by registering the slightly misspelled <barginbid.com>, which linked visitors to Ubid?s auction site. Bargain Bid further alleges that Ubid is equally guilty under the UCPA as it knew Belcher was purposefully diverting consumers and continued to allow this conduct even after Ubid received Bargain Bid?s cease and desist letter. Ubid maintains that it complied with Bargain Bid?s letter as soon as it learned of the problem. Bargain Bid, however, claims that Ubid had a duty to monitor its affiliates.

The court temporarily enjoined all defendants from using Bargain Bid?s trademarks, claiming any affiliation with the company, and from destroying documents concerning the action. Thus far, Bargain Bid has not decided which form of damages it will seek.

? On January 4, 2000, cable shopping network QVC, the owner of the ?QVC? mark, filed suit in U.S. District Court in Philadelphia against an Arizona man who launched an online pornographic shopping network under the domain name <AdultQVC.com>. QVC brought suit under the ACPA, seeking an injunction and the maximum statutory damages of $100,000, contending that the defendant had a bad faith intent to profit from the QVC trademark.  In addition, QVC alleges further trademark violations, including a claim for trademark dilution.

? On January 6, 2000, EMAP-Peterson, Inc., the publishers of Teen Magazine, filed a lawsuit under the TCPA in the New Jersey District against an operator of adult web sites seeking an injunction and unspecified damages. Plaintiff and operates a web site at <teenmag.com>. Defendant?s site, <teenmagazine.com>, directed visitors to a pornographic web site.  In addition, when users attempted to disconnect from defendant?s site, they were bounced to other pornographic web sites. Defendant claims that he is not violating any law since ?teen? and ?magazine? are generic words and that he did not act in bad faith as he had no intention of selling the domain name to plaintiff for profit. The court temporarily restrained defendant from using <teenmagazine.com> because the site could irreparably harm the image and reputation of the popular Teen Magazine which is located on-line at <teenmag.com>. A recent visit to <teenmagazine.com> links visitors to the magazine?s official site.

? On December 6, 1999, Harvard University filed suit in United States District Court in Massachusetts, alleging that defendants registered approximately 65 domain names that incorporated, ?Harvard? and ?Radcliffe.? The names were auctioned off for sale on the now defunct site HarvardYardSale.com.

? An Illinois auto dealership, Schaumburg Hyundai, filed suit under the ACPA in January against a competitor, Northwest Valley Dodge & Hyundai (?Northwest?), seeking return of the contested domain name <schamburghyundai.com> registered by defendant Northwest.

? The New York Yankees, owners of the trademark ?New York Yankees?, filed suit in the United States district Court for the Southern District of New York against the defendant who registered the domain name <newyorkyankees.com>.

2. Personal Domain Names

? Actor Brad Pitt brought suit under the TCPA against two United Arab Emirates residents alleging that the defendants attempted to sell the domain name, <bradpitt.com> to the actor. Visitors to the site found an advertisement to sell the domain name. Pitt also filed suit against a fan site operating at <bradpitt.net>.

? Kenny Rogers filed suit against the registrant of <kennyrogers.com>.  That site now links to an error message stating that the site cannot be found.

? On January 19, 2000, John Tesh filed a claim against Celebrities, Inc. for registering the domain name <JohnTesh.com>. Defendants?s web site linked visitors to the defendant?s. web site at <celbrities.com>, which features celebrity gossip and links to various celebrity web sites. Tesh contends that this unauthorized site may compromise his official fan site located at <tesh.com>. Tesh eventually settled his claims against defendant.

3. Suits involving Foreign Parties

? Quokka Sports, a company licensed to operate web sites for the New Zealand America?s Cup team sought an injunction in federal district court in California against individual defendants and their companies who registered the domain name <americascup.com> with Network Solutions, Inc. Plaintiff owns and operates a web site at <americascup.org>. On December 8, 1999, Quokka obtained a temporary restraining order. A recent visit to <americascup.com> brings visitors to plaintiff?s web site.

? A coalition of professional U.S. sports leagues, including NBA Properties, NHL Enterprises, NFL Properties and MLB Properties, filed suit on December 21, 1999 in the United States District Court for the Southern District of New York against a Canadian businessman for selling e-mail addresses that incorporated various team trademarks as part of the second-level domain (e.g. [email protected]>.

The leagues allege that defendant acted in bad faith in registering the domain names and using them without the benefit of proper licensing. The leagues contend that some fans may believe that a particular team is affiliated with the defendant?s service. The leagues are seeking an injunction, transfer of the domain names to the leagues, and unspecified monetary damages for trademark infringement, cybersquatting, dilution, unfair competition and false designation of origin of the e-mail accounts.

? Tennis Australia uses the domain name <ausopen.org> to promote the international tournament. An American company, Go Tennis, registered the domain names, <autralianopen.com> and <ausopen.com>. On January 24, 2000, the Arizona Federal District Court granted a temporary injunction against Go Tennis. As a result, Go Tennis must display a disclaimer on the disputed sites to indicate that they are not affiliated with the Australian Open. Further, the Go Tennis sites must direct visitors to Tennis Australia?s official site. Trial is scheduled to begin on September 13, 2000.

4. In Rem Actions

? On January 29, 2000, a federal magistrate ruled that Bell Atlantic may assume control of over 20 domain names registered by alleged cybersquatters. The ruling is the first under the TCPA?s in rem provisions, which allow a trademark owner to sue a domain name directly. Prior to passage of the ACPA, Bell Atlantic was forced to individually sue more than 90 defendants. Bell Atlantic utilized the in rem provisions to sue those who either refused to relinquish control of the offending domain names or who could not be located. The federal judge presiding over the case must still approve the magistrate's decision.

5. Criticism as Free Speech or Cybersquatting?

? Ricart Automotive (?Ricart?), a Columbus, Ohio-based automotive dealer filed a lawsuit citing the ACPA against the owner of two web site sites critical of the car dealer found at <ricartauto.com> and <ricartwutoripoffs.com> -- domain names that incorporated Ricart?s trademarked name. The defendant established the web sites after complaining to state officials about a warranty dispute with the dealership. To ally free speech concerns, the ACPA permits sites featuring criticism or parody, or other non-commercial fair uses. See 15 U.S.C. ? 1125(d)(1)(B)(i)(IV). Ricart Automotive alleges that defendant violated the ACPA by offering the domain names to plaintiff for $175,000. Whether this case will be framed as a free speech concern or a trademark violation is yet to be determined. The auto dealer is seeking injunctive relief, as well as, the $100,000 maximum statutory damages. The defendant has voluntarily shut down the contested sites while the lawsuit is pending.

? Telecommunications giant, Lucent Technologies filed suit in December in a federal court in Alexandria, Virginia seeking an injunction against the owner of a pornographic web site located at <lucentsucks.com>. Currently, the site has apparently been taken down.

Respectfully Submitted By:

Jonathan Hudis (Chair)
Oblon, Spivak, McClelland, Maier & Neustadt, P.C.
(for American Intellectual Property Lawyers Association)

Sam Mosenkis
American Society of Composers, Authors, and Publishers

Susan Anthony
MCI Worldcom
(for International Trademark Association)

David Safran
Sixby, Friedman, Leedom & Ferguson
(for American Intellectual Property Lawyers Association)

Brian Darville
Jacobson, Price, Holman & Stern
(for American Intellectual Property Lawyers Association)

Rinaldo Del Gallo
(for American Intellectual Property Lawyers Association)

Janine Benton
Epstein, Becker & Green, P.C.
(for American Bar Association/Intellectual Property Law Section)

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