Wednesday, March 5, 2014

For Those That Believe That a Loser UDRP Complainant Should Pay

Every so often a seemingly merit-less UDRP Complaint is publicized, and rightfully so. It is often shocking to see complaints that purport to challenge a domain name, that was for example, generic, or that was registered before the corresponding trademark was even a "twinkle in the eye" of the trademark owner. These kind of complaints are often accurately characterized as "Reverse Domain Name Hijacking" attempts ("RDNH"). RDNH cases are in reality, relatively very rare in comparison to the thousands of bona fide complaints that are brought. But when an RDNH-type complaint is filed by a sophisticated  complainant with an equally sophisticated law firm representing it, one cannot help but be justifiably concerned that a kind of attempted "fraud" or "theft", is being attempted in broad daylight, under the guise of a legal proceeding.

When such complaints are filed, many observers and domain name owners will suggest that complainants who are found to have engaged in RDNH should be made to pay the registrant's legal fees. Surely, that would seem to be fair, as otherwise a finding of RDNH would continue to largely be toothless, without any direct consequences. On the other hand however, if complainants should face cost consequences for RDNH, there are surely many trademark owners that would like to see cost consequences against unsuccessful registrants.

Under the British and Canadian legal systems, unlike the American one, generally successful parties are entitled to be reimbursed for their legal fees and expenses, to a varying degree. Accordingly, if there were to be a "loser-pays" system, a registrant who loses a UDRP could be ordered to pay the successful complainant's legal fees.

Although I am unaware of a complete "loser pays" system in UDRP disputes, there are at least a couple of examples of UDRP-type arbitrations that do feature a partial loser-pays system. Under the Belgian (.be) domain name arbitration system, a successful complainant is entitled to a refund of its filing fee (€ 1,750). Interestingly, it is the registry (DNS.be) that reimburses the complainant when successful, but the registry then claims this amount back from the unsuccessful registrant. In contrast, under the Canadian (.ca) domain name dispute arbitration procedure, a registrant will never be held responsible for any costs or legal fees, but a complainant who is found to have engaged in RDNH, may be held liable by the Panel for up to $5,000.00. In that case, it is up to the registrant to collect the funds in small claims court and the complainant is barred from bringing any more cases until it pays the amount due. Accordingly, there are at least these two examples of a "loser pays" system.

Some observers and domain name owners might suggest that the only fair approach would be to have an unsuccessful complainant pay, and never have the registrant pay. Aside from the obvious self-serving motivations for such an approach, the claimed logic of such proponents is often that 'RDNH is so egregious and akin to theft, that it must be punished accordingly, if only for deterrent's sake'. That may be true, however it is difficult to distinguish RDNH from cybersquatting on a fundamental level. Both are egregious and both contain elements akin to fraud and theft. From a trademark owner's perspective, cybersquatting, by its very nature, if not by definition, involves the intentionally registering a domain name 'belonging' to someone else, for the purposes of extortion or interference with business interests. From a domain name owner's perspective, RDNH involves an abuse of legal process in an attempt to unjustifiably obtain the transfer of someone's rightful property, often perpetrated through misrepresentation and deceit, with the assistance of legal counsel, no less. Accordingly, cybersquatting, arguably often smacks of attempted 'theft' and 'fraud' of sorts, to a comparable extent as RDNH, and both are entirely unjustified and unlawful.

So, if there ever were to be a "loser pays" system in UDRP disputes, there would likely be significant pressure to make it apply to both complainants and respondents, since good arguments exist for both. Nevertheless, if there were to be an "equal playing field" under a "loser pays" system, it would be registrants that overwhelmingly would end up paying, since the volume of RDNH cases pale in comparison to cases of cybersquatting. And if registrants feel content with that, they should be nonetheless wary, as such a system could be coupled with a prohibition on registering or maintaining any domain names until the penalty is paid, as a means of enforcing a costs order. And if even that is palatable to registrants just so they can see a penalty for RDNH, then they should take heed of the number of terrible UDRP decisions that have been issued and not taken to court by registrants (because of cost), since registrants could be at risk of losing a case for no good reason, and thereby become liable for payment of the complainant's legal costs or else face restrictions on registering domain names or face collection in courts.




5 comments:

Aloha Shirts said...

What of an existing, functional online store where someone then goes out after the fact and gets a trademark?

Zak Muscovitch said...

Generally speaking, obtaining a trademark after a domain name was registered, would not help a complainant in an ICANN UDRP but could sometimes be helpful in a trademark infringement action.

Philip Corwin said...

Well said Zak. All I'd add is that a 'loser pays' regime, which would inevitably be a 2- way street, would almost surely result in more UDRPs being filed.

Zak Muscovitch said...

Many thanks for reading and for the comment, Phil. Yes, I agree, it would incentivize complainants who would get a cost award in most cases, so there would likely be more cases, even if the awards were not usually recoverable.

Nat Cohen said...

Good points Zak. Since the UDRP is biased in favor of complainants, and regularly produces terrible decisions that amount to domain theft, adding loser pay would simply compound the unfairness of the process. It would also give trademark bullies another club to use to threaten small business owners.