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Franchisors Brandish Pair of Powerful Weapons in the War on Cybersquatters.

Just before the start of the new millennium, President Clinton signed into law a bill that will combat what is commonly referred to as "cybersquatting." The new law, known as the Anti-cybersquatting Consumer Protection Act (ACPA), expands the reach of U.S. trademark law to cover the practice of cybersquatting.

Also in late 1999, Internet Corporation for Assigned Numbers and Names (ICANN), adopted its Uniform Domain Name Dispute Resolution Policy (UDRP) (which can be found at With these two developments, trademark owners' arsenals are bristling with new weaponry to attack the problem of cybersquatting.

Cybersquatting occurs when a person registers an Internet address, known as a domain name, that contains the name or trademark of another party. Many franchisors have encountered this problem and had been frustrated in their attempts to recover their own domain name. There are two kinds of top level domain names: the commonly-used .com, .org., and .net suffixes, known as generic top level domain names (or gTLD's), and country-code top level domain names (or ccTLD's), such as .ca (Canada), .de (Germany), .fr (France), .it (Italy), and .jp (Japan). The ACPA covers all top level domains, gTLDs and ccTLDs.

Before the ACPA was enacted, or ICANN's rules adopted, trademark owners, such as franchisors, seeking to attack cybersquatters often faced an uphill battle. One option for addressing problems with gTLD's was to use the Network Solutions, Inc. (NSI) domain name dispute procedures. Under these procedures, a franchisor had to prove that its trademark registrations were identical to the offending domain name. Many franchisors who use characters such as an apostrophe (') or an ampersand (&) in their registered marks were stymied by NSI's policy, since a domain name cannot include such characters and, accordingly, could be confusingly similar but not identical. Attempts to initiate a conventional federal trademark lawsuit required a franchisor, among other things, to obtain jurisdiction (often over a party that gave false information to the domain name registry) and prove the elements of an infringement claim (e.g., commercial use).


As domain names have become a more important part of branding and commercial identification, akin to but different than traditional trademarks, so too does the ACPA provide relief that is akin to, but different than, the relief available in traditional trademark infringement actions. In general terms, the ACPA allows a trademark owner to bring a claim under the Lanham Act if another party registers, traffics in, or uses the trademark owner's name or mark (or one that is confusingly similar to, or dilutive of, the mark); and has done so with a "bad faith intent to profit." The law applies not only to registered marks, but also to unregistered trademarks and individuals' names.

The ACPA includes nine factors that courts may consider to determine whether the "bad faith" element has been met. The list is not exhaustive, and judges are permitted to look at other factors as well. Among the enumerated factors are whether the defendant offered to sell or auction off the domain name. In addition, courts may look to see whether the defendant has registered or acquired numerous domain names as a sign of the requisite "bad faith intent" under the ACPA.

Where the registrant gives false or misleading information to the registrar, or fails to maintain correct information, the ACPA gives the plaintiff the right to sue in rem; that is, to sue the domain name itself (since the defendant cannot be located). The same in rem procedure can also be invoked if the defendant is not subject to the jurisdiction of U.S. courts.

The ACPA affords franchisors and other trademark owners the right to recover special damages in a lawsuit, including, at the court's discretion, statutory damages which do not require special proof (e.g., $1,000 to $100,000 per domain name), an injunction against further use of the infringing domain name, an order requiring the domain name registrant to forfeit the domain name, and an award of the trademark owner's legal fees and costs. If the offending domain name was registered after the ACPA became law on November 29, 1999, then the award of statutory damages and attorney's fees is far more likely.

Franchisors and other trademark owners are entitled to invoke the ACPA to protect their trademark rights, evenwhen the domain name is registered to a party outside the United States. However, in doing so, they will need to also convince a court that the exercise of jurisdiction over a defendant outside the U.S. is appropriate. In Quokka Sports, Inc. v. Cup Int'l Ltd., a federal court in California agreed that it was proper to assert jurisdiction under the ACPA over a New Zealand-based defendant where the Web site in aimed at customers in the U.S. in general and California in particular, and the trademark in question was a U.S. registered mark.

Numerous cases have been commenced under the ACPA. Thus far, the decisions rendered by courts have been consistent with the law's goals, as well as predictable. In one case, Virtual Works, Inc. v. Network Solutions, Inc., the court observed that "Internet cyberpiracy constitutes per se trademark dilution" ... and finally determined that "[t]he holder of a domain name should give up that domain name when it is `an intuitive domain name' that belongs to another ... [and] `VW' is the `intuitive domain name' of Volkswagen."

One important area where special care and attention is necessary in order to address a cybersquatter is the ever-growing number of gripe sites. While there are cases suggesting that these sites have some measure of protection as commercial free speech under the First Amendment to the U.S. Constitution, there are also cases in which courts have distinguished between the Web site's content (which might be protected) and the allegedly offending domain name (which often is not protected). In all, these cases should be closely watched, as the facts of each case -- and the application of the ACPA -- make it clear that gripe sites require deft handling.

ICANN's Rules

Another powerful tool available to trademark owners facing a cybersquatter is ICANN's UDRP. Under the UDRP procedures, a complaint is submitted to ICANN, and after an exchange of papers, the complaint will be heard by either a single arbitrator or a panel of three arbitrators. The process is quick, efficient, and relatively inexpensive. In order to succeed, the complainant must satisfy the three-prong test set out in the UDRP, which is similar to that under the ACPA. Under the UDRP, the complaining party has the burden to prove that:

The respondent's domain name is identical or confusingly similar to a trade mark or service mark in which the complainant has rights; the respondent has no rights or legitimate interest in respect of the domain name; and the respondent's domain name has been registered and is being used in bad faith.

While there are undoubtedly benefits to an ICANN proceeding, damages are not available and, if there is to be an appeal, it must be in the home country of the registrant (a consideration of greater consequence, quite obviously, when the registrant is outside the U.S.). All decisions, except in unusual circumstances, are publicly available on ICANN's Web site, As of late July, there had been 771 dispositions by decision under the UDRP, 591 resulting in relief for the trademark owner, and 174 that were favorable to the registrant.

Franchisors and other trademark owners will find the Anti-cybersquatting Act and ICANN's Uniform Domain Name Dispute Resolution Policy to be potent and useful tools at all stages of resolving domain name disputes, from before they blossom, to deterring parties from aggregating trademark owners' domain names for the purpose of auctioning them off to the highest bidder, to remedying problems when they occur by settlement and, when necessary, legal action.

Lee Plave is a partner in the Franchise and Technology Practice Groups of Piper Marbury Rudnick & Wolfe LLP, in its Washington, D.C. office.
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Title Annotation:domain name laws
Author:Plave, Lee J.
Publication:Franchising World
Geographic Code:1USA
Date:Sep 1, 2000
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