The AntiCybersquatting Consumer Protection Act: Old Protections in a New Medium.

While the Internet breaks new ground in business at ever-increasing speeds, Congress recently passed a law that leaves no doubt that some old rules still apply when it comes to protecting trademarks and famous persons' names.

The AntiCybersquatting Consumer Protection Act was enacted on November 29, 1999, to clarify that certain existing legal protections involving trademarks or the name of a well-known person also apply to cyberspace. This clarification will help to avoid lengthy, expensive litigation to resolve every dispute.

Cyberpirates use trademarked and well-known brand or celebrity names hoping that the brand owner, trade-mark holder or celebrity will pay a ransom for them. In addition, cybersquatters also register compound or similar names and then attempt to appropriate business from the trademark owner or to confuse consumers into thinking they have arrived at the Web site owned or sponsored by the trademark owner or celebrity.

In an atmosphere where generic names like Wall Street.com have sold for millions of dollars, such cyberpiracy proliferates. Lawsuits relying on the Act now proliferate as well, as illustrated by some recent examples:

Home-shopping service QVC has filed a suit involving the Web site and domain name AdultQVC.com.

Eastman Kodak Co. has filed a trademark action, against a film store owner whose domain name registrations include Kodakfilm.com, Kodakemployees.com Kodakshareholders.com, which were developed as web-sites used to complain about Eastman Kodak. (Note: The outcome would likely be different if the store owner had registered Kodakstinks.com.)

In a classic case of "typosquatting," Bargainbid.com has won a preliminary injunction against an individual who registered a domain name and operated a Web site called Barginbid.com. Not only did the cyberpirate confuse the public and divert customers away from Bargain Bid's business, it also provided a link to rival YouBid.com, with the link generating commissions for the cyberpirate. In this case, Bargain Bid is also requesting that it be awarded the misspelled domain name.

In Volkswagen AG v. VirtualWorks, Inc., relying on factors set forth in the Act, the court found that "intuitive domain names" should be relinquished if they are not yet registered to the person for whom the name is intuitive.

The publishers of Teen magazine, whose teenmag.com Web site is devoted to its mostly teenage girl readership, won a preliminary injunction under the Act against the owner of a similarly named Web site, teenmagazine.com, after complaints arose about pornography and erotica on that site. Although the owner of the controversial teenmagazine.com claimed to have sold the domain name to a company operating several "adult" Web sites, the New Jersey federal court voided the sale under the Act and prevented any subsequent sale to other parties of that domain name. Relying on the new law, the court concluded that Teen magazine's publishers would be irreparably injured if teenmagazine.com's owner kept or continued to use that domain name.

What factors determine Cybersquatting?

The new AntiCybersquatting Act is an amendment to the decades-old Lanham Act, which Congress passed primarily to prohibit unfair competition and false advertising. The AntiCybersquatting Act prohibits anyone with a bad faith intent from registering, trafficking in or using a domain name representing a trademark or other famous name. The Act provides judges with a highly discretionary list of criteria to determine bad faith, but does not require judges to limit their review to this list. The factors lobe considered in determining bad faith are:

* the intellectual property rights of the registrant in the disputed domain name;

* whether the trademark's owner has registered the trademark;

* the extent to which the domain name is the same as the registrant's own name or nickname;

* the registrant's prior use of the domain name in connection with the bona fide offering of any goods or services;

* the registrant's non-commercial or fair use of the mark in a Web site accessible under the domain name;

* the registrant's intent to divert consumers from the trademark owners own Web site to an online location that could bring harm or impair the good will of the owners trademark;

* the registrant's offer and/or intent to transfer, sell or otherwise assign the domain name to the trademark owner (or any third party) for profit rather than using or having the intent to use the domain name for any bona fide purpose, or a prior pattern of such conduct;

* the registrant's acquisition or registration of multiple domain names which the registrant knows are identical or confusingly similar to or diluting of the trademarks of others; and,

* the extent to which the mark incorporated in the registrant's domain name is or is not distinctive and/or famous.

The Act also amended the Lanham Act to address jurisdictional problems that arise when plaintiffs pursue cybersquatters who register domain names and merely "bank" them with no intention to put them to any use or any actual use as Web sites.

What are the "wronged" entitled to?

The owner of the disputed trademark (including an owner of common-law rights in an unregistered trademark) may be entitled to the following remedies under the Act:

* a court order against the cybersquatter requiring the forfeiture, cancellation or transfer of the domain name to the owner of the trademark or the famous name;

* actual or statutory damages of at least $1,000 and as much as $100,000 per domain name "as the court considers just";

* "in rem" jurisdiction against the domain name itself if the cybersquatter cannot be located, which permits the trademark owner to sue in the U.S. District Court where the domain name registration authority is located. The court in the CaesarsPlace.com case upheld both the constitutionality of the "in rem" provisions of the Act and that a plaintiff is not required to have first unsuccessfully attempted to establish "in personam" jurisdiction;

* the Act retroactively applies to domain name registrations before November 29, 1999. Statutory damages are not available against cybersquatting registrations occurring prior to that date, but actual or statutory damages are available, along with injunctive relief for acts of cybersquatting that continue after the enactment date.

The Act does not apply to situations where there is a bona fide trademark in use by many entities whose businesses are not in conflict In a hypothetical situation where United Airlines, United California Bank and United Artists all seek the domain name United.com the name would go to the company to register it first and, thereafter, maintain the registration through appropriate fees and administration. (United.com is actually owned by United Airlines). In addition, the Act does not apply to domain name "warehousing" where profiteers, as well as companies and individuals attempt to protect existing rights or profit from multiple domain name registrations, thereby lessening the number of available, desirable domain names in the marketplace. The Act also carves out exceptions for legitimate uses, such as a fan club that does not use the famous name for profit.

Critics of the Act charge that it does not adequately protect small business owners. The critics fear the threat of litigation and high damages awarded by the Act will unfairly favor big business by intimidating individuals or small businesses into giving up legitimate domain names they hold. The current battle between a European art group called Etoy and the popular Web site eToys is being watched closely. In that case, the art group claims it registered the domain name two years before eToys and therefore has a right to the domain name. A Los Angeles judge has already issued a preliminary injunction ordering the art group to stop using the domain name or risk fines of up to $10,000 per day. Some critics also claim that the highly subjective standard accorded to the court for determining bad faith makes it difficult to adequately counsel a client accused of cyberpiracy.

The Act does make the legislative intent clear to all those who register a domain name identical or confusingly similar to a distinctive or famous name, with a bad faith attempt to profit: Beware.

Susan A. Grade is a partner in the Los Angeles office of Katten Muchin Zavis, where she concentrates her practice in the areas of Internet, e-Business, New Media, intellectual property and entertainment law.