The Business Litigation Blog

Cybersquatting: Understanding Regulations to Maintain Your Valuable Web Presence

In today's business environment, a strong internet presence is not only helpful, but essential to growing a business, and is often the first point of contact between a business and its potential consumers. This evolution has had many benefits, making it easier to connect one's business to customers throughout the world but, at the same time, it has also created a new set of problems, of which cybersquatting may be the largest.


Cybersquatting is the act of registering a domain name in hopes that it can later be sold at a profit should the name become more valuable. An example would be a person registering a domain name of "", expecting that, as time goes on, a film by the name of "Superman 5" will come into existence, and that the studio promoting the film, wanting to have control over the "" website, will pay the owners of that domain name a steep fee for it.


This system was ripe for abuse, especially in the early days of the internet, when many corporations had not yet grasped the importance of having a strong web-based presence, and so did not register appropriate domain names before cybersquatters got to them first. That was a two-fold problem. These domain names were typically extensions of intellectual property and yet, at the time, the holders of that IP had no legal recourse at the time. Even worse, because the internet does not stop at national boundaries, adding a jurisdictional problem as well.


As the internet expanded and increased in importance, the issue of cybersquatting became more and more pressing, until, around the turn of the millennium, two different regulations, both intended to prevent cybersquatting were enacted, and remain in effect today. They are the Uniform Domain-Name Dispute Resolution Policy (URDP) enacted by the Internet Corporation for Assigned Names and Numbers (ICANN) in 1999, and the Anti-Cybersquatting Consumer Protection Act (ACPA), an amendment to the Lanham Act, passed by the U.S. Congress in 1999.


The URDP was formulated by ICANN soon after the latter's founding as a way to try and create a relatively fast and inexpensive method of handling cybersquatting disputes. As a non-profit agency that has assumed the responsibility of regulating the use of domain names, one of the largest problems facing ICANN was the issue of cybersquatting, especially the problem of navigating a maze of local, state and national trademark laws in the United States, to say nothing of the rest of the world. Using its position as the highest authority on the matter of domains, and that as part of registering a domain name, every registrant is bound to abide by their terms of service, the URDP was ICANN's attempt to solve the cybersquatting conundrum.


The operation of the URDP, by design, is straightforward. A complainant will file a URDP complaint with any of a number of arbitrators approved by ICANN. The responding party has a chance to respond, and then the panel will rule on whether the holder of the domain name is cybersquatting and, if so, will order the domain name transferred to the complainant. In making this determination, the arbitrators will consider (1) whether the domain name is trademarked by the complaining party, or is confusingly similar to the trademark, (2) whether the current holder of the domain name has any legitimate rights or interests to the domain name, and finally (3) whether the holder of the domain name has been acting in bad faith. The entire process is much quicker than litigation, and the costs and fees are often only a few thousand dollars, with a final decision in two-to-three months or less. The main drawback with the URDP process is that the remedies the arbitration panel can award are limited to the transfer of the domain name. An arbitration panel convened under URDP cannot, by rule, award any monetary damages of any kind.


In comparison, the Anti-Cybersquatting Consumer Protection Act, which is now integrated into the Lanham act, does allow for money damages, just as in any other trademark case. In its attempt to prevent cybersquatting, the U.S. Congress decided, instead of creating a new legal framework, to effectively extend the existing laws regarding trademark to include domain names. In order to have aprima faciecase under the ACPA, the claimant must show that (1)the domain holder has a bad faith intent to profit from the domain name, (2) that the domain holder has registered, used, or trafficked in a domain name that (3) uses a trademark, or is confusingly similar to a trademark owned by the claimant. Because of the potential difficulty in establishedin personamjurisdiction in a cybersquatting suit, given the global nature of the internet, the ACPA also provides forin remjurisdiction to be established in certain cases, mostly when personal jurisdiction over the domain holder would be impossible to be established or where the holder cannot be located. The main advantage of the ACPA is that it does allow for the recovery of monetary damages, which, depending on the case, can be considerable. On the other hand, the ACPA is slower, considerably more expensive when attorneys' fees are taken into account, and much more procedurally demanding.


In general, the elements needed to show the existence of cybersquatting are broadly similar to those of the URDP and, in many cases, the decision between going through the URDP process and suing under the provisions of the ACPA is a tactical choice. When making the decision of how to proceed in a case of cybersquatting, time, expense, and the potential recovery of damages are all factors that merit consideration. Having a strong and undiluted web presence can be one of the most vital elements to maintaining one's business in this digital age, and knowing how to weed out cybersquatters is essential to maximizing a company's investment in that web presence.


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