In the early days of the Internet, it was fairly common for someone to try to register a domain name of a well-known brand since many brands lagged behind in registering their names. While companies are much savvier now about protecting their brands, “cybersquatting” still occurs in various forms and can be costly to a business causing financial and reputational harm.
What is Cybersquatting?
Cybersquatting is when someone registers the domain name of another entity with the intent to financially gain from the goodwill and reputation of the identity (or brand). The third party will register the name and then try to either sell the domain name back to the rightful brand owner or otherwise profit from diverting the brand’s customers to the cybersquatter’s website. Cybersquatting applies when the third party registers the same or similar name to the brand.
In response to these practices, Congress enacted the Anticybersquatting Consumer Protection Act (ACPA) to protect brands from third parties seeking to misuse their brand in bad faith.
What Are the Elements of a Cybersquatting Claim?
The ACPA authorizes a trademark owner to sue an alleged cybersquatter in federal court to obtain a court order that transfers the domain name back to the trademark owner. In some cases, the cybersquatter must also pay monetary damages.
A trademark owner must prove all of the following:
- Bad faith intent to profit from the use of the trademark;
- The trademark was distinctive at the time the domain name was first registered;
- The domain name is identical or confusingly similar to the trademark; and
- The trademark qualifies for protection under federal trademark laws.
In addition, the cybersquatter must be the party who registered the offending domain name.
Trademarks must be distinctive in order to be protected under the ACPA. Courts consider trademarks that are famous, arbitrary, suggestive, or fanciful as inherently distinctive. In addition, names coined for the specific purpose of the trademark, without meaning beyond that context, also qualify. Among the factors which may be considered in determining distinctiveness are the duration and extent of the mark’s use, the geographical area in which the mark is used, the duration and extent of use and the degree of recognition of the mark in the parties’ trade channels.
Business owners can, but are not required to, register their trademarks. However, one of the benefits of federal registration on the principal register of the United States Patent and Trademark Office (USPTO) is that the trademark is presumed distinctive.
Identical to or Confusingly Similar
In many cases, the offending domain name is the same as a registered trademark. However, ACPA may also apply when the domain is “confusingly similar.” Notably, whether a domain name is “confusingly similar” to a trademark is evaluated without regard to the goods or services of the parties. This is a different standard from the “likelihood of confusion” standard for trademark infringement.
To establish trademark infringement, a plaintiff must show the defendant’s use of the mark in commerce causes a likelihood of confusion about the source of goods or services. Among the factors used in determining likelihood of confusion is the similarity of the products and services offered by the plaintiff and defendant or likelihood that the plaintiff would expand into the defendant’s market. This analysis is not needed under ACPA.
Bad Faith Intent
The intent of ACPA was to prevent cybersquatters from registering domain names in bad faith. The law sets forth nine non-exclusive factors for courts to consider when weighing whether an infringer acts in bad faith. These include:
- The trademark or other intellectual property rights of the person, if any, in the domain name;
- 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;
- The person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
- The person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
- 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;
- 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, or the person’s prior conduct indicating a pattern of such conduct;
- The person’s provision of material and misleading false contact information when applying for the registration of the domain name, the person’s intentional failure to maintain accurate contact information, or the person’s prior conduct indicating a pattern of such conduct;
- The person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
- The extent to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous within the meaning of the statute.
The infringer must intend to specifically profit from “squatting” on the domain name itself, rather than merely commit trademark infringement. For example, bad faith can be shown where a party registered a domain without using or having an intent to use that domain name in an actual offering of goods or services and then tried to sell the domain back to the brand owner for a high price. Other examples of bad faith include a party seeking to profit from diverting confused customers to the wrong domain, where they purchase the wrong services, or to defame the brand by directing people to a site with pornography.
However, bad faith will not be inferred if the defendant believed or had reasonable grounds to believe that the use of the domain name was fair use or otherwise lawful.
Can Damages Be Recovered?
The ACPA enables trademark owners to obtain a court order that transfers the domain name back to the trademark owner. In addition, damages may be awarded up to $100,000 per act of cybersquatting, as well as attorneys’ fees in exceptional circumstances.
Are There Additional Remedies?
A trademark owner can also file a complaint under ICANN’s Uniform Domain Name Dispute Resolution Policy to bring the cybersquatting to arbitration. All domain names must be registered with ICANN. To succeed in the proceeding, claimants must show:
- The domain name is identical or confusingly similar to the claimant’s trademark or service mark;
- The alleged cybersquatter has no rights or legitimate interests in respect of the domain name; and
- The domain name is being used in bad faith.
To determine if a name has been registered in bad faith, ICANN will consider several factors. While ICANN arbitration is less expensive than litigation under the ACPA, the only remedy available through ICANN is the cancellation or transfer of the domain name. No money damages will be awarded.
Cybersquatters can cause a business significant harm. Companies should actively monitor the internet for parties using identical or similar names. If any are found, an experienced attorney can help enforce your rights.
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