Domain Name Disputes: The United States Experience

INTRODUCTION

The collision between cyberspace and trademark law has sparked a series of disputes, and raised a host of issues, regarding the ownership and use of so called "domain names." The proliferation of world wide web "home pages" or "web sites" has made the domain name a potentially valuable commodity, particularly the ".com" variety.

The simple system originally designed by the internet pioneers for assigning domain names, "first come, first served, no questions asked" was consistent with the wide open spirit of the "net", but it quickly collapsed once domain names were perceived to have great commercial value and, in particular, great value as trademarks.

This paper will briefly identify the main players and review the history of domain name disputes and their resolution. However, even as this paper is written, changes are underway that could dramatically change the landscape.

YOU CANNOT TELL THE PLAYERS WITHOUT AN ACRONYM

One of the baffling aspects of the domain name controversy is trying to figure out who all the players are and what responsibilities they have. While an exhaustive review of internet structure and governance is beyond the scope of this paper ¹, a brief list and description of the main players is essential to an understanding of the issues and the process.

The most publicly visible of these entities is NSI which since 1993 - based on its agreement with NSF - has the authority to assign domain names in the top level .com, .org ,.gov, and .edu categories. Initially, NSI did not charge for this service but when it became apparent that most of the registrations granted were in the .com category the NSF authorized NSI to begin charging a fee. ³

NSI now processes about 10,000 applications per month, a staggering increase over the 300 applications per month processed in 1993.

WHAT IS A DOMAIN NAME

To visit a Web site one needs the address, i.e. the unique location of a computer connected to the internet. The actual electronic address consists of a series of numbers, like a telephone number. A numeric electronic address is matched by NSI to a "domain name" chosen by the user ⁴ (e.g. microsoft.com) which is easier to use and easier to remember than a series of numbers. ⁵ Categories have been established to segregate domain names by the status of the user. The present scheme in the United States designates the following top level domain name categories:

Outside of the United States, different categories have been established by the local naming authority, charged with the assignment of top level domain names. ⁶ All domain names are matched to a numerical address (IP), thereby allowing access to that location by anyone, irrespective of where they are located. ⁷

Initially, most people thought of domain names not as a trademark, service mark, trade name, or other piece of "intellectual property", but simply as one element of the electronic address. The commercial possibilities of the internet were, at best, dimly recognized at the beginning. As a result, the assignment of domain names was seen as a simple process, i.e. "first come, first served, no questions asked" and this was what NSI adopted in 1993. Anyone who wanted a particular domain name could have it. The only prohibition was that no two domain names could be exactly identical; each domain name had to be unique as it corresponded to one computer location.

One of the first groups of people to recognize commercial possibilities inherent in the internet were those cyber-savvy entrepreneurs who realized that the owners of famous company names and/or trademarks would probably want to have a corresponding domain name in the ".com" category, e.g. "mtv.com". These entrepreneurs (or pirates depending on one's perspective) rushed in to (successfully) register domain names consisting of famous trademarks/service marks/trade names. It was this realization, fueled by the "first come, first served, no questions asked" policy that created the first collision between the rights of trademark/service mark/trade name owners and holders of domain names.

THE EVOLUTION OF DISPUTES AND THEIR RESOLUTION

The registration of famous trademarks/service marks/trade names as domain names by someone other than the famous mark/name's owner created the first set of controversies. Some of these took on a humorous air, such as the registration of "mcdonalds.com" by a writer for WIRED magazine (one of cyberspace's leading publications) who not only registered the domain name, but crowed about it publicly. ⁸

The NSI had no policy for dealing with what most commercial concerns viewed as a blatant hijacking of a piece of valuable intellectual property. Once a company discovered that a domain name which comprised its famous mark/name existed, the company usually threatened litigation until some resolution could be reached. On occasion, the disputes reached another level: when Stanley Kaplan (a leading test preparation firm in the U.S.) learned that its arch rival had registered "kaplan.com" as a domain name, it took an arbitrator's decision in favor of Kaplan to force the competitor to relinquish the domain name.

NSI become concerned when companies who could not work out any resolution started suing NSI. ⁹ To avoid such suits, the NSI decided it had to act, and developed a "Domain Name Dispute Policy Statement" in July, 1995, later modified in November of 1995. The Policy kept the basic concept of "first come, first served", but it did make it possible (indeed likely as described below) for the owner of a trademark registration to capture a corresponding domain name. The policy had another basic goal: to protect NSI by requiring applicants to make certain representations as part of the application process and to indemnify NSI for third party claims which NSI had to defend.

In fact, the NSI policy was highly favorable to the owners of trademark registrations. Essentially, if a trademark owner learned that his or her mark is the subject of a domain name, it simply had to inform NSI by providing a certified copy of a federal registration for a mark which was identical to the domain name and was in use prior to the activation date of the domain name: upon such a showing, the owner of the domain name was in a very difficult position. The NSI's policy provided for certain options: the only one which would allow the domain name holder to maintain the name was seemingly simple - produce a US or foreign trademark registration for a mark which was identical to the domain name. ¹⁰

Even if the domain name holder was able to produce such a registration, this would not automatically preserve the right to use the domain name. The Policy indicated NSI could at that point demand that the domain name holder post a bond or sign a very open ended indemnification agreement before allowing the domain name holder to continue to use the name.

While the Policy appeared to work very well for situations involving outright "piracy" (i.e. where one party had no claim to a domain name other than the fact he/she was first to register the domain name), it quickly became apparent that the Policy might not work very well if conflicting claims of rights were involved. NSI's Policy, for example, did not require the objecting party to make any allegation of injury, or even that use of the domain name was likely to cause confusion, the traditional legal standard in the United States for trademark infringement and unfair competition. While this traditional standard recognizes the right to use the same or similar marks in the marketplace absent a likelihood of confusion, the NSI Policy did not. The owner of a trademark registration would "trump" a domain name holder, even if the domain name holder had common law rights which it could exploit (and may have been exploiting) without any claim of infringement by the trademark owner.

The Policy did contain one loophole that was not initially apparent. The Policy specified that the domain name owner (once an objection was raised) had to produce a "US or foreign registration certificate" and do so within thirty days. Since the issuance of a US registration or foreign registration takes much longer than thirty days, a domain name holder without a registration once the challenge began appeared to be doomed. However, an enterprising lawyer realized there was one place that would issue almost instantly a certificate of registration, the country of Tunisia. What if a domain name holder produced a Tunisian Certificate of Registration in response to a challenge, based on a US registration? Who should prevail under those circumstances?

The criticism of the Policy was harsh and almost universal. The procedure was criticized as arbitrary, and the substance was criticized as inadequate to deal with trademark rights of all parties to a potential dispute, e.g. the policy gave no recognition to valid common law rights.

Further, the Policy did not achieve one of its basic objectives: insulating the NSI from lawsuits. Widely reported litigation over the domain name "roadrunner.com" erupted soon after the Policy took effect. The Roadrunner Computer System of Santa Fe, New Mexico registered the domain name "roadrunner.com", in 1994 in accordance with the "initial first come first served no questions asked" policy of NSI. The company was clearly not a "pirate" (the word "roadrunner" was part of its corporate name) and there had never been any challenge to its use of the word "roadrunner" as part of its corporate name. Warner Brothers, the owner of the "roadrunner" cartoon character and the owner of a federal registration for the mark ROADRUNNER, challenged the domain name pursuant to the NSI Policy, producing a copy of its federal registration. According to the Policy, this registration should carry the day for Warner Brothers, having precedence over common law rights and even without regard to the question of infringement, i.e the likelihood of confusion. One might ask, however, if "ROADRUNNER" as the name of a computer company and as the name of a cartoon character can coexist in the real world without confusion, why can they not coexist in cyberspace? The NSI's policy made no such allowance and the parties tried to reach an agreement. When negotiations broke down, Roadrunner Computer produced a Tunisian registration for ROADRUNNER it had obtained literally overnight.

NSI refused to accept the Tunisian certificate (on the ground that it had not been produced within the initial thirty days after the challenge even though the parties had stipulated to a delay in the NSI proceedings while settlement talks went forward). Roadrunner Computer then sued NSI under theories of breach of contract (the policy was imposed after the registration of the name) and others. Roadrunner Computer's complaint alleged that NSI, as a government contractor, had a duty to implement policies that were fair and evenhanded. The challenge was eventually dismissed by NSI under fairly interesting circumstances. ¹¹

The Roadrunner case was not the only filed against NSI arising out of a domain name dispute. There were many others. The Policy, therefore, did not serve the goal of preventing the NSI from being sued and, as the acquisition of a Tunisian registration by Roadrunner Systems demonstrated, the Policy itself had flaws. Without overtly admitting failure, NSI very recently tried again, introducing effective September 9, 1996, a revised Policy. ¹²

The new Policy does not change the "first come, first served" system, and it continues to give preference to the owner of trademark registrations, but it does have some material alterations. The Policy asserts as the fundamental principals the following:

• Domain names will be given on a first come first served basis;
• NSI does not determine the legality of domain name registrations;
• The applicant must represent (in the application) that the registration of the domain name requested does not interfere with the rights of any third party and is not being registered for any unlawful purpose;
• NSI does not act as the arbiter of disputes;
• The policy does not confer any rights on any party.

The procedure for resolving disputes - based on these principals - was modified in some important ways. A challenge to a domain name can be initiated if the NSI is presented with a certified copy of a United States Principal Register Registration (or a foreign registration) which is identical to a domain name and prior notice is given by the trademark owner to the domain name holder "specifying unequivocally and with particularity that the use of the Registrant's domain name violates the legal rights of the trademark owner". Upon receipt of these two documents, NSI will invoke the "Third Party Procedures" specified in the Policy.

The Third Party Procedures state that the Procedure "recognizes that trademark ownership does not automatically extend to a domain name". Nevertheless, the Procedure continues to favor the owner of a trademark registration over the holder of a domain name.

If the domain name owner can establish that the activation date of the domain name was prior to (i) the date of first use of the trademark or service mark in the registration submitted by the challenger; or (ii) the effective date of the registration submitted by the challenger, the domain name holder can continue to use the name (see Policy Sections 6(a) and (b)). If the activation is after the earlier of either of these two dates, NSI will request proof of ownership by the domain name holder in the form of a certified copy of a registration, namely, a U.S. Principal Register or foreign registration issued prior to notice of the dispute given by NSI or the challenger). Policy Section 6(c). (Tunisia's fifteen minutes of trademark fame now sadly comes to an end.)

If the domain name holder fails to produce such a registration, refuses to develop a new name, or ignores the NSI's challenge, the domain name is placed "on hold" available to neither party, unless a court order is issued determining ownership, or the parties reach a resolution. An important change in the Policy (implemented to try to keep NSI out of court) is that if litigation is initiated by either the domain name holder or the challenger, the domain name will not be placed on "hold"; rather, the NSI will deposit the domain name into the registry of the court for its control.

Does this new Policy represent a step forward? Because the Policy does not take into account common law rights, or even attempt to deal with the question of competing rights on an international level, it is likely that criticism will continue. However, it does seem that the courts will be called upon to resolve issues in this context, and in particular be asked to apply the principals of trademark law to domain name disputes. There are several which pre-date the new Policy that have been reported. ¹³

One case involved the site "candyland.com." CANDYLAND is a famous children's board game that has been sold for years and years. Hasbro, Inc is the owner of the mark CANDYLAND. However, the candyland.com site was not a reiteration or a advertisement for the children's game, but a very adult site that offered steamy entertainment under the logo CLUB LOVE. Hasbro sued the domain name holder and was able to obtain a preliminary injunction against the continued use of the domain name. The domain name was changed and as of the writing of this paper the case is still pending.

THE FUTURE IS AHEAD OF US

It is difficult to predict in this context what the future will bring. NSI's new Policy is not likely to resolve any issues involving the competition for domain names. In fact, the Policy appears to be specifically designed to keep NSI out of the determination of conflicting rights (except on a limited basis), and to encourage the parties to work out disputes among themselves or initiate litigation. Courts will thus be asked to apply traditional notions of trademark law to the use, and to the registration, of domain names. ¹⁴ If two marks or names can coexist in the marketplace (without confusion), then who should have the right to use the domain name, of which only one can exist at any particular time? These issues will be difficult to resolve when one reviews rights generated under U.S. law (including rights generated under the common law) and become even more complex when one considers trademark rights arising under the laws of multiple jurisdictions.

Another factor relevant in this context is the recent passage in the United States of a federal dilution act (The Dilution Act of 1995, 15 USC Section 1125(c)). Is the concept of dilution broad enough to prevent the registration and use of a domain name which is identical to a famous mark? Certainly, the Dilution Act gives the owner of an allegedly famous mark another weapon to argue that only it is entitled to a domain name, even if the use of a domain name does not result in any likelihood of confusion. The litigation which has already been commenced, and will result from the new NSI Policy, will be carefully watched.

The assignment of domain names may well change dramatically in any event. The IANA has issued a proposal (endorsed in principal by ISOC) that a number of new top level domains be created. Such parallel or multiple registrations will provide alternatives to the ".com" top level category (e.g. ".inc" or ".co"). The operation of these new top level domain names will be handled by a licensing structure administered by the IANA, and may be instituted as early as January of 1997.

Whether the creation of multiple registries will solve the issues raised by competing trademark rights in the domain name context is open to some debate. Will multiple registries simply force companies to obtain multiple registrations of their principal corporate names or trade names (e.g. "microsoft.com" and "microsoft.inc." etc.). By creating enough categories, however, proponents of the multiple registry system argue that it would make allowance for the fact that the same or very similar trade names and trademarks can coexist in the marketplace (within certain areas of use) and should be able to coexist through the use of multiple domain names. ¹⁵

Another aspect is the proliferation of naming authorities on an international scale. As noted above, many jurisdictions have set up their own naming authorities, primarily based on a country code. It is reported, for example, that "yahoo.com.uk" is registered not to the owner of the well-known web browser YAHOO located at "yahoo.com", but to an unrelated entity. Does this mean that companies should acquire domain names in multiple jurisdictions?

CONCLUSION

Domain names, for better or for worse, are now considered by many to be a piece of valuable "intellectual property". Most companies would be wise to register their principal trade names and/or trademarks as domain names, and follow the developments relating to the creation of new top level domain names as they occur carefully. Also, when considering the choice of a new trade name or trademark, the availability of a domain name which is identical to that name or mark, may be an important consideration. Many commercial search reports now include a section devoted to domain names.

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¹ For an in-depth discussion of all of the players and their role in the internet see, INTERNET NAMES; WHOSE DOMAIN IS THIS?, Information Law Alert, July 26, 1996 http://infolawalert.com.

² "Information Law Alert", July 26, 1996, supra.

³ The NSF amended its contract with NSI to authorize the charging of a fee. Currently, a $100 fee is required (for the first two years of the registration which are paid up front), with $50 per year renewal fees. Since the vast majority of registrations were by commercial entities in the ".com" category, the NSF did not want to subsidize what became essentially a commercial endeavor.

⁴ NSI registers domain names in the United States. Other jurisdictions have designated their own naming authority to issue domain names within the top level domains established locally. The ".com" domain names are not reserved for U.S. entities, however, non-U.S. entities (in addition to or in lieu of obtaining a domain name through its local registry) have acquired and are using ".com" domain names.

⁵ A "domain name" is also portable; the underlying numerical address (IP) may change if, for example, one changes service providers.

⁶ In the United Kingdom, for example, the national top level domain authority has created a series of subdomains under the "uk" country code. See Domain Names within the U.K. at "http://www.nic.uk/new/domains_1.html" and "http://www.nic.uk/proposals/rupl.html".

⁷ Outside of the United States, most registries use a country code as the top level domain, e.g. ".com.uk". Individuals and entities in the United States, much to the chagrin of many in the international cyber community, have not generally followed this convention; ".com.us" is rarely used or registered.

⁸ See Joshua Quittner, Billions registered: "Right Now are No Rules to Keep You From Owning a Bitchin' Corporate Name as Your Own Internet Address", Wired, October, 1994 at p. 50.

⁹ One such suit was brought by a company called KnowledgeNet, Inc., when it learned of the existence of the domain "knowledgenet.com".

¹⁰In the absence of a registration, the NSI would provide for a ninety day transition to a new name, or the domain name would be put on "hold", unavailable for anyone, until a court or arbitration tribunal ruled on conflicting claims of ownership.

¹¹Warner Brothers was not a party to the lawsuit and, indeed, had made no allegation in the court proceeding that the use of "roadrunner" by Roadrunner Computer Systems as a domain name was an infringement. However, in its challenge filed with NSI, Warner Brothers asserted that the domain name registration for "roadrunner.com" injured it. After the suit was filed by Roadrunner Computer Systems against NSI, NSI (through its parent) asked Warner Brothers to write a letter stating that it was still being harmed by the registration of the "roadrunner.com" name. Warner Brothers refused to send such a letter, and NSI then dismissed Warner Brothers' challenge, and then moved to dismiss the lawsuit on the ground that it was moot.

¹² The policy can be found at "ftp://rs.internic.net/policy/internic.domain.policy".

¹³Georgetown School of Law maintains a website on domain name disputes at "http://www.law.georgetown.edu/ic/internic/domain.html".

¹⁴For example, the Chicago Sun Times, on September 23, 1996, ran an article about a small company in Illinois which has registered as domain names the principal trade names and/or trademarks of over 100 companies (e.g. "deltaairlines.com"). None of these sites are active ones, and the holder of the domain names has reportedly requested several thousand dollars to relinquish them. At least three companies have sued this individual, raising the question of whether the mere existence of a domain name can constitute infringement, dilution, or otherwise injure the trademark owner.

¹⁵For example, if two companies use the same mark, one in the computer field and one in the music field, without confusion, one could register "xyz.computer" and the other "xyz.music" in two separate registries, and not have to compete for the single ".com" name.