The explosive growth of the Internet has led many companies to realize the great value of having their own easy-to-locate web site, identified by a unique "domain name." Obtaining a domain name that corresponds to a company name or to the company's trademarks is an important step in establishing a visible, easily accessible Internet presence.
Often, however, companies have tried to register company names and/or trademarks as domain names, and have discovered that someone else (a "cybersquatter") has already registered the name. In Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998), the Ninth Circuit Court of Appeals became the first appellate court to hold that a cybersquatter who registers a famous mark as a domain name can be held liable to the trademark owner, even though the cybersquatter is not actively attaching the mark to any goods or services.
Panavision holds a registration for the trademark "Panavision." When the company tried to register the domain name "Panavision.com," it found that Toeppen, an Illinois resident, had already registered it. Toeppen's Panavision.com web site displayed pictures of the City of Pana, Illinois.
Panavision instructed Toeppen to stop using its Panavision trademark. Toeppen offered to settle the matter for a payment of $13,000. Panavision refused and sued claiming, among other things, that Toeppen's activities violated the Trademark Dilution Act, which requires a plaintiff to demonstrate that:
(1) the mark is famous; (2) the defendant is making a commercial use of the mark in commerce; (3) the defendant's use began after the mark became famous; and (4) the defendant's use of the mark dilutes the quality of the mark by diminishing the capacity of the mark to identify and distinguish goods and services. Toeppen, 141 F.3d at 1324; 15 U.S.C. § 1125(c).
Toeppen conceded that Panavision's marks are famous and his use began after they became famous; hence, the Court was only concerned with whether Toeppen's use of the marks was "commercial" and whether it "diluted" the marks.
Toeppen argued that registration of a trademark as a domain name does not rise to a commercial use under the Trademark Dilution Act. The Court left this issue for another day, pointing out that Toeppen's "use is not as benign as he suggests." Toeppen, 141 F.3d at 1325. The Court found that Toeppen had registered over 100 domain names using other famous marks and had tried to sell these domain names to the trademark owners. His actions prevented trademark owners from conducting business on the Internet using their trademarked names unless they paid his fee. This, according to the Court was a commercial use.
On the issue of dilution, the Court first noted its definition of "dilution" as "the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the famous mark and other parties, or (2) likelihood of confusion, mistake or deception." Id. at 1326 (citing 15 U.S.C. § 1127). The Court then observed that when it enacted the anti-dilution statute, Congress had in mind stemming "the use of deceptive Internet addresses taken by those who are choosing marks that are associated with the products and reputations of others." Id. The Court adopted the district court's reasoning that Toeppen had diminished "the capacity of the Panavision marks to identify and distinguish Panavision's goods and services on the Internet." Id. (citation omitted).
Toeppen argued that his actions did not affect the capacity of the Panavision marks to identity Panavision's goods and services because Panavision could promote its goods on the Internet with a different address. The Court, however, rejected Toeppen's premise that a domain name is nothing more than an address, finding that domain names serve the significant purpose of identifying the owner of the Internet address. The Court also noted that a domain name which mirrors a corporate name can be a valuable asset, citing MTV Networks, Inc. v. Curry, 867 F. Supp. 202, 203-204, n. 2 (S.D.N.Y. 1994). Moreover, the court found Toeppen's actions diluted the value of Panavision's trademarks because potential customers of Panavision may be discouraged or even abandon their search if typing Panavision.com fails to locate Panavision's web site.
The Court's analysis in Toeppen suggests that a third party registering a famous trademark as a domain name will in most circumstances run afoul of the Trademark Dilution Act. Any third party registration of a famous trademark as a domain name necessarily dilutes the mark because a potential customer will not locate the web site of the owner of the mark, and the owner has no control over the content of the third party's web page. Assuming, therefore, that a mark is famous and its fame predates the domain name registration, the only issue will be whether there has been a commercial use. The Court's focus on Toeppen seeking to profit from denying Panavision the use of its marks, indicates that any registration that is intended to provide a benefit to the registrant will constitute a commercial use regardless of the actual use to which the site is put. Thus, simply registering a mark as a domain name with the expectation that it will provide a future benefit to the registrant is likely to be enough to constitute a commercial use.