Cybersquatting Ain't What It Used To Be: The Cybersquatter's Day

In November 1999, two big things happened in the domain name world. The first was that the ICANN domain name dispute resolution process that had begun in 1998 was finalized. At about the same time, the Anticybersquatting Consumer Protection Act (ACPA), part of the Trademark Act under 15 USC 1125(d), went into effect in the United States. In both these processes, a trademark holder can hold a domain name which is made up, entirely or in part, of a trademark he owns transferred to him as use of his trademark without a license, otherwise known as trademark infringement.

Since the passage of ACPA, more than 700 lawsuits seeking injunctions or damages have been filed, and since the institution of the ICANN arbitration system, 5845 arbitration decisions regarding over 9722 domain names have been issued. Of the 5845 arbitration decisions, 4595 have resulted in domain name transfers or cancellations; that is, in almost 80% of the cases, the domain names were transferred to trademark holders. Therefore it is important that you keep trademark in mind not only when picking your trade name, but also when picking your domain name.

Under the ACPA, a trademark holder can bring legal action to (a) have a domain name transferred to the holder or cancelled; and (b) obtain actual damages and costs, or statutory damages of between $1000 and $100,000 per domain name at the court's discretion. At least one court has already awarded $500,000, $100,000 per domain name, to deter a known cyber squatter from further squatting and to put him out of business.(See Electronics Boutique Holdings Corp. v. Zuccarini, US Dist. Court, Eastern District of PA, October 30, 2000.)

Even as a sole practitioner, I get at least three calls a month from someone who has registered a domain name and has just gotten a "cease and desist" letter like this one which was posted in a chat room on the web regarding Porsche:

LAW OFFICES HOWARD, PHILLIPS & ANDERSEN A PROFESSIONAL CORPORATION July 21, 2000 VIA E-MAIL and REGULAR MAIL X in Germany Re: Infringement and Dilution of Porsche Trademarks Dear Mr. X: This law firm represents both Dr. Ing. h.c.F. Porsche AG and Porsche Cars North America, Inc. ("Porsche") on trademark matters and in trademark litigation. Porsche takes policing and enforcement of its trademark rights on the Internet seriously. This letter is an attempt to resolve your infringement and dilution of the Porsche trademarks short of litigation. You should be aware that Porsche recently obtained a preliminary injunction against the registrant of PORSCHESOURCE.COM in Porsche Cars North America, Inc., et al. v. Spencer, 2000 WL 641209 (E.D. Cal.). Porsche is also seeking $100,000 in statutory damages in this lawsuit under the recently enacted Anticybersquatting Consumer Protection Act. As you may also be aware, Porsche has filed a lawsuit against 128 Internet domain names that use the trademarks Porsche® or Boxster®, or variations of the trademarks Porsche® or Boxster® in Internet domain names. This lawsuit is presently pending before the Fourth Circuit Court of Appeals. The Eastern District of Virginia held that "the mere act of registration [of domain names containing Porsche trademarks] creates an immediate injury [to Porsche] . . . [c]ustomers might try to contact Porsche through 'PORSCHE.NET,' for example, only to find that they have reached a 'dead end' on the Web and then to conclude that the strength of Porsche's brand name is not as great as they first thought." Porsche Cars North America, Inc. et al. v. PORSCH.COM, et al., -F.Supp.2d-, 1999 WL 378360 (E.D.Va. 1999). In short, the law is well settled that the misappropriation of famous trademarks as domain names violates the Lanham Act and dilutes trademarks. See, e.g., Panavision International, L.P. v. Toeppen, 1998 WL 178553 (9th Cir. April 17, 1998). It has recently come to Porsche's attention that you have registered the Internet domain name PORSCHEFANCLUB.COM that uses the world famous trademark Porsche®. It appears from the many other domain names that you have registered and that are listed in the Internic Whois Database that you are a cyberpirate and a cybersquatter. You should be aware that the Anticybersquatting Consumer Protection Act makes it unlawful to register famous trademarks in an Internet domain name and provides for statutory damages of up to $100,000.00 per domain name. PORSCHE®, the Porsche Crest®, CARRERA®, TARGA®, and BOXSTER® are some of the registered trademarks of Dr. Ing. h.c.F. Porsche AG, and are proprietary property of that corporation. Usage of the Porsche trademarks or any confusingly similar variation thereof, without consent, violates state and federal law, is misleading to the public, and constitutes a misappropriation of the goodwill and reputation developed by Porsche. In order to resolve this issue amicably and without litigation, please sign and return a copy of the enclosed Declaration of Cancellation of Domain Names. This matter will then be fully resolved as far as you are concerned. If the Declaration is not signed and returned to me on or before August 4, 2000, Porsche will initiate legal action against you with respect to the Internet domain names that you have registered and seek damages in the amount of $100,000 per domain name as the Anticybersquatting Consumer Protection Act allows. This letter is without prejudice to all rights of Porsche, including past or future royalties, past or future damages, attorneys' fees, and to bring enforcement actions for all past or future infringement, dilution, or unauthorized uses. Should you or your attorney have any questions concerning Porsche's position in this matter, please do not hesitate to contact me. Sincerely, Ms. X Trademark Paralegal

I find these letters depressing. These are the kind of letters that cause people to hate lawyers.

Notice of the problem and the trademark holders' intent to file a claim are required by the ACPA, but the tone of these letters is not. Instead of nicely explaining what the law is, what the goal is and how appreciative the trademark holder would be if the domain name holder was courteous enough to transfer the name as requested, these letters bombard the recipients with legal jargon and serious threats without context or explanation. In the above case with Porsche, this is especially striking since the domain name at issue is that obviously is owned by people that like, or used to like, Porsche.

What is also surprising is how the trademark holders, even regarding relatively unknown marks, assume that the registrant knew all about the mark and is trying to steal something. The registrants I've spoken with did not know that their action was not legal and often did not know anyone owned a trademark matching the domain name registered. If the mark doesn't have international fame, then the registrants simply do not know there's a potential problem. The registrant then gets the above letter and is angry and afraid. Angry because the registrant is often out time, effort and money and because the registrant feels that he or she had the foresight to register this name and the letter writer did not, so it is unfair that the registrant suffer. The "cease and desist" letters rarely offer to compensate the domain name holder in any way - not even for the registration fees paid - and if the domain name holder should be unfortunate enough to ask for any money for his or her time or the name or whatever, that can be used as evidence of bad faith in the court or arbitration proceeding.

When I have a client on either side of the cybersquatting scenario, I urge starting with the polite request approach. Usually, I can succeed that way through some polite explanation of the law over the phone and a little patience. That approach also costs my clients less that either court or arbitration would since both of those require filing fees and lengthy legal briefs. More importantly, solving disputes through discussion makes me feel good and helps me prove that, at least occasionally, lawyers can act like human beings and make someone's day instead of ruining it.

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