Friday, April 26, 2013

A Short History of Cybersquatting Law

By Zak Muscovitch

When the Internet was young, domain name disputes were a new phenomena. After all, never had there ever been something quite like cybersquatting.

After centuries of development, traditional trademark law was well equipped to handle trademark infringement, but "trademark infringement" had always been predicated on "use", i.e. in order to "infringe" someone's trademark right, the infringer must have actually "used" the trademark owner's mark in commerce without authorization.

But trademark law could not adequately deal with cybersquatting, because cybersquatting did not necessarily involve "use" of a trademark in commerce. For example, someone could register, without permission of the famous multinational manufacturer of all kinds of products, and just sit, or squat, on it, without even attempting to "use" the domain name to sell anything, or to advertise anything, or do anything at all else with it, other than prevent the brand owner from registering it.

Was this trademark infringement? Not really, since where was the "infringement"? There was merely a registration of a domain name that corresponded to a trademark, but no actually infringing use; something that had traditionally been required under trademark law.

At least one court admirably attempted to harness old-fashioned trademark law in order to address this new phenomenon of cybersquatting. The "One in a Million Case", as it was referred to, involved a claim by British Telecommunications, Marks and Spencer, and others, versus One in a Million Ltd., and was ultimately heard by the British Court of Appeal. The defendants were a dealers in Internet domain names, which back in 1998 was something of a novelty. According to the court, the defendants, who lost the first round in the lower court and then appealed the decision to the Court of Appeals, "have made a speciality of registering domain names for use on the Internet comprising well-known names and trade marks without the consent of the person or company owning the goodwill in the name or trade mark. Examples are the registration and subsequent offer for sale to Burger King by the second defendant of the domain name for £25,000 plus VAT and of to British Telecommunications for £4,700 plus VAT."

The novelty of the Internet itself in the case, was palpable, as the Court made what would now be considered a trite and superfluous observation on what the Internet was, namely, "at its simplest [it] is a collection of computers which are connected through the telephone network to communicate with each other." Quoting the trial court judge, the Appeals Court even went so far as to point out that the Internet was apparently on its way "ip", as it noted that, "[it] is increasingly used by commercial organisations to promote themselves and their products and in some cases to buy and sell." Quite hilarious in hindsight, but at the time (in 1997 when the original case was heard), most people you would ask, would not even be able to tell you what the Internet was.

Now, the British courts ingeniously (no doubt with the able assistance of lawyers) came to the clever conclusion, that although the unauthorized registration of domain names by the defendants may not have been "trademark infringement" per se, because of the absence of use, the defendants' conduct nevertheless was tortious, because it constituted "passing off", a cause of action related to, but not the same as, trademark infringement. The trial court judge made the following observation to underscore his conclusion:

"In the case of Marks & Spencer, it is in my judgment beyond dispute that what is going on is calculated to infringe the plaintiff's rights in future. The name marksandspencer could not have been chosen for any other reason than that it was associated with the well-known retailing group. There is only one possible reason why anyone who was not part of the Marks & Spencer Plc group should wish to use such a domain address, and that is to pass himself off as part of that group or his products off as theirs." 

The Court of Appeals Panel reached a similar conclusion:

"It is accepted that the name Marks & Spencer denotes Marks & Spencer Plc and nobody else. Thus anybody seeing or hearing the name realises that what is being referred to is the business of Marks & Spencer Plc. It follows that registration by the appellants of a domain name including the name Marks & Spencer makes a false representation that they are associated or connected with Marks & Spencer Plc. This can be demonstrated by considering the reaction of a person who taps into his computer the domain name and presses a button to execute a “whois” search. He will be told that the registrant is One In A Million Limited. A substantial number of persons will conclude that One In A Million Limited must be connected or associated with Marks & Spencer Plc. That amounts to a false representation which constitutes passing-off."

Now, this is where it gets particularly interesting. The defendants' counsel had argued that just like non-use of a domain name could not possibly be considered "infringement", mere registration and non-use of a domain name could not be considered passing off, since there had been no "passing off" nor could there have been, without any use of the domain name itself. Well, the Court of Appeals came up with the ingenious solution to solve this problem occasioned by an apparent "gap" in the law. The Court held that the "passing off", i.e. the misrepresentation, occurred not as a result of use of the domain name, since that had never occurred  but rather, from the mere recording of the defendants' names in the associated Whois directory:

"The placing on a register of a distinctive name such as marksandspencer makes a representation to persons who consult the register that the registrant is connected or associated with the name registered and thus the owner of the goodwill in the name. Such persons would not know of One In A Million Limited and would believe that they were connected or associated with the owner of the goodwill in the domain name they had registered. Further, registration of the domain name including the words Marks & Spencer is an erosion of the exclusive goodwill in the name which damages or is likely to damage Marks & Spencer Plc." 

Moreover, the British Appeals Court judges, even fashioned a way of considering the unauthorized registration of domain names by the defendants to be considered trademark infringement, of sorts, since the domain name registrations were "instruments of fraud", and a "threat" of infringement was present since the whole purpose of the confusingly similar (to trademarks) registrations was to sell the domain names, and moreover, the defendants would "use" the domain names in their trade as dealers. As you can see, these legal acrobatics were required in order to harness the newly discovered phenomena of cybersquatters, with the ancient trademark. But in worked.

It did not work easily or well enough however, to adequately deal with cybersquatting which was increasingly becoming the scourge of trademark owners all over the world. Never before could a kid with $10 hold a multinational company to ransom over a domain name that the kid had registered before  head office got around to realizing the Internet was here to stay.

Accordingly, the UDRP was conceived of, and implemented, together with the US AntiCybersquatting Consumer Protection Act. Countries like Canada and the UK however, did not pass specific domain name legislation like the US, and accordingly the common law and the UDRP continues to be what is relied upon in those countries, 15 years later.

1 comment:

city said...

thanks for share..