General Practice, Solo & Small Firm DivisionMagazine

Volume 17, Number 6
September 2000



Lisa Carroll

Domain names have led to new disputes that the current status of law and policy fails to fully resolve. Several domain name holders, known as cyberpirates or cybersquatters, have incorporated trade and service marks owned by others into their domain names with the hopes of extorting a fee for assigning or licensing the domain name to the mark owner. The mark owners want to stop the domain name holder from continuing to use a name that usurps their mark and undermines the goodwill in the mark. The domain name holders, who have invested in registering the name, want to retain their right to use their domain names.

For mark owners, this can be a frustrating situation that even recently enacted provisions designed to address domain name disputes specifically cannot always rectify. This article proposes that United States attorneys consider state unfair competition law dealing with corporate name registration along with the new domain name provisions initiated by Congress and ICANN and traditional trademark law remedies. Background on Domain Names. Domain names allow computers to connect to each other and help the user identify with whom he or she is communicating. Each computer registered on the Net is assigned a unique name consisting of memorable words. Memorable domain names assist "web surfers" to quickly locate a particular website. What could be a better domain name for a company than its recognizable trademark?

Essentially, anyone with time to fill out a short registration form and a little cash can use a mark belonging to another in a domain name without the mark owner’s authorization. Mark owners can combat competitors’ free-riding on the goodwill of their mark as they have traditionally done through trademark infringement, dilution and unfair competition law. However, they must take a different tack to reach the cybersquatter. Bending Trademark and Unfair Competition Law to the Point of Breaking. A trademark is not protected under federal or state law unless and until it is attached to a good or service. However, the most onerous domain name disputes involve domain name holders who do not use the mark commercially or in commerce. Rather, these disputes involve cyberpirates or cybersquatters whose only commercial endeavor is to extort money from the mark owner. Common theories raised in trademark disputes fail to address the unique problem posed by the majority of domain name disputes. Until the recently enacted federal Anti-Cybersquatting statute and the Uniform Domain Name Dispute Resolution Policy implemented by ICANN, courts were forced to perform machinations in order to reach the desired outcome in favor of the mark owner.

The most notable of these machinations were with respect to the still relatively new Federal Trademark Dilution Act. The new Anti-Cybersquatting statute has apparently eliminated the courts’ willingness to tweak the Federal Trademark Dilution Act.

Within the last several months, however, it has become apparent that neither the new Anti-Cybersquatting statute nor the ICANN dispute resolution policy has succeeded in resolving all domain name disputes. Both provisions require proof of bad faith and list several factors that indicate such. These factors do not address the cybersquatter who is not a direct competitor of the mark owner’s, has not offered the domain name registration for sale, or has not registered several domain names incorporating others’ marks. An alternative means of resolving these types of domain name disputes is through the use of state unfair competition law dealing with corporate name piracy. State Unfair Competition Law: A Better Alternative. In many states, "it is a wrongful act to organize a domestic corporation by the same name as that already known to be used in the state by a foreign corporation." Much as the courts have tended to do in domain name disputes, the courts sitting in corporate name disputes have distinguished between innocent defendants and pirates. Where the defendant has been a domestic corporation that properly filed articles of incorporation with the state and the plaintiff failed to abide by the laws for doing business within the state, the courts have held that the domestic corporation that first registered the name has superior rights to it. If the defendant registered the name in bad faith, however, the courts will find that the foreign corporation has priority rights in the name even if the foreign corporation did not comply with the state law for certifying the name. Bad faith in these cases means that the defendant registered the name "with the fraudulent purpose of pirating the business of the corporation or with actual knowledge of the existence and name of the foreign corporation." A defendant under this rule need not intend to directly compete in commerce with the plaintiff, need not attempt to sell the name, and need not to have registered several other names. If the defendant merely knows of the plaintiff and that the name he or she has registered is the name under which the plaintiff does business, the court will enjoin the defendant’s further use of the name. This is what mark owners hope to accomplish in their pursuit of cyberpirates.

Moreover, this theory nullifies the cyberpirate’s argument that domain names rightfully belong to whoever registers them first. Under the equitable rule applied in corporate name cases, the fact that the plaintiff corporation failed to register its name with the state is not dispositive. The courts in these cases recognize that the defendant registered the name to prevent the plaintiff from doing so. Because the "broad principle underlying [these cases is] . . . the prevention of fraud," they refuse to apply rules of priority where the rule of equity counsels otherwise. Prevention of fraud underlies the most common domain name disputes, and those of cyberpiracy as well. The same equitable considerations applied in the state unfair competition cases regarding corporate names should govern this new form of name piracy.

Lisa Carroll is an associate with Bell, Boyd & Lloyd in Chicago, Illinois, where she works in the Intellectual Property Department.

This article is an abridged and edited version of one that originally appeared on page 1 of IPL Newsletter, Winter 2000 (18:2).

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