Domain name registration is not the only thing about to crank into high gear. The release of new gTLDs will also generate new lawsuits, as businesses fight over the right to own domain names which incorporate their trademarks. While procedures are under consideration whereby trademark owners would get first dibs on domain names in the new gTLDs, there are still bound to be problems. In anticipation of the wave of domain name disputes which will be created by the release of new gTLDs, this article provides a review of the trademark infringement problems created by the domain name system. It also provides some tips on advising clients who find themselves on either side of a domain name dispute.
A trademark, used here generically to include both trademarks and service marks, is a designation used to identify and distinguish the goods or services of a person. Because trademarks arise through their use, a business can acquire common law trademark rights simply by using its mark in commerce. However, common law trademark rights extend only to the markets within which the trademark owner has actually used the mark. A common law trademark owner can acquire additional rights by registering the mark on the Federal Primary Registry. Registration gives the trademark owner the exclusive, nationwide right to preclude others from using the same mark, subject to certain limitations.
The principal goal of trademark law is to prevent marketplace confusion about the actual source of the goods or services in question. Thus, as long as there is no likelihood of confusing consumers, it is perfectly acceptable to have "Widget’s" computers and "Widget’s" wigs. And because trademark rights are limited by geographic boundaries, trademark law will allow "Widget’s" computers to be sold by one company in Arizona and by a different company in Florida, as long as there is no likelihood of confusion.
But what happens when "Widget’s Computers" in Arizona registers the domain name "widgetscomputers.com" before "Widget’s Computers" in Florida? When a company registers a domain name identical to its trademark, it launches the once geographically limited trademark into worldwide use and the possibility of confusion arises.
This tension between the territorial nature of trademarks and the limitless nature of the Internet was recently acknowledged by the Ninth Circuit, which noted the "challenging task of applying centuries-old trademark law to the newest medium of communication — the Internet." AVERY DENNISON CORP. v. SUMPTON, 189 F.3d 868, 871 (9th Cir. 1999). The tension will only increase with the upcoming release of new gTLDs and the continuing ease with which domain names are registered.
While a business may not be able to prevent the registration of domain names using its trademark (other than by registering the domain names itself), it can seek the cancellation or transfer to it of offending domain names. There are two ways of going about this. The first and quickest method is to file a complaint with ICANN. Registrants of domain names are subject to ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP), which provides for a "mandatory" administrative proceeding to resolve domain name disputes.
Decisions under the UDRP are based on the submissions of the parties without a hearing. Under the UDRP, the party seeking transfer of a domain name files a complaint with an ICANN-approved dispute-resolution provider. The complainant must establish, through documentary and other evidence, the following factors: (1) the manner in which the domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; (2) why the domain name holder should be considered as having no rights or legitimate interests in respect of the domain name that is the subject of the complaint; and (3) why the domain name should be considered as having been registered and being used in bad faith. In addition, the complainant designates whether to have the dispute decided by a single-member or a three-member administrative panel. If the complainant elects a three-member panel, the complainant nominates three potential panelists from any ICANN-approved dispute-resolution provider’s list of panelists.
The domain name holder has 20 days from the date the dispute-resolution provider forwards the complaint to it to submit a response. Among other requirements, the response should address the statements and allegations in the complaint and, if the respondent also desires a three-member administrative panel, nominate candidates for the panel. Following the submission of the response, the dispute-resolution provider elects the panelists to decide the matter. If both the complainant and respondent elect to have a one-member panel, the dispute-resolution provider selects the panelist. If either or both parties elects to have a three-member panel, the dispute-resolution provider attempts to empanel one candidate nominated by each party, and selects the third panelist from a list of five candidates which the provider submits to the parties.
The turnaround time for decisions is rapid. The UDRP Rules require that except in cases involving "exceptional circumstances," the panel must forward its decision to the dispute-resolution provider within 14 days of appointment.
Once a decision is rendered, parties are still able to submit their domain name dispute to the courts. Indeed, while called "mandatory," the UDRP procedures generally do not prevent parties from resorting to the courts either before or after an UDRP proceeding has been initiated. For instance, despite losing in an UDRP proceeding, an unsuccessful complainant may nevertheless file a court action for trademark infringement and/or dilution. Unsuccessful domain name holders may also seek redress in the courts, but must act quickly. In particular, if an administrative panel decides that a domain name should be canceled or transferred pursuant to the UDRP rules, ICANN will wait ten business days after being informed of the administrative panel’s decision before taking action, thus allowing the domain name holder to file a lawsuit before domain name cancellation or transfer occurs.
Although the UDRP provides a quick and efficient means of resolving domain name disputes, proving a domain name was registered and used in "bad faith" can be difficult. To show bad faith, a complainant must present evidence showing that: (1) the domain name holder registered the name primarily for the purpose of selling it to the owner of a trademark which is identical or similar to the domain name; (2) the domain name holder registered the domain name to prevent a trademark owner from obtaining a domain name reflecting its mark (provided the domain name holder has engaged in a pattern of such conduct); (3) the domain name holder registered the name primarily for the purpose of disrupting the business of a competitor; or (4) the domain name holder has used the domain name to attract Internet users by creating a likelihood of confusion with the complainant’s mark.
When two legitimate businesses get involved in a domain name dispute, both having trademark rights in the name at issue, bad faith may be non-existent. Using the example described at the beginning of this article, assume that "Widget’s Computers" in Arizona registers the domain name "widegetscomputers.com" before "Widget’s Computers" in Florida. Assume further that both "Widget’s Computers" in Arizona and "Widget’s Computers" in Florida are unrelated companies which both have legitimate trademark rights to their business names. In this example, it would be nearly impossible for "Widget’s Computers" in Florida to establish that the domain name "widgetscomputers.com" was registered in bad faith by "Widget’s Computers" in Arizona. In such circumstances, the trademark holder seeking the cancellation or transfer of a domain name incorporating the trademark will not likely prevail in an UDRP proceeding. For these types of disputes, a lawsuit may be the only route to resolution.
Several options are available to the trademark owner who seeks redress through the courts. For instance, if the domain name registrant is a "cybersquatter" — someone who registers a domain name knowing it is confusingly similar to another’s trademark for purposes of reaping a profit — the trademark owner may pursue a cause of action under the new "cyberpiracy prevention" provision of the Lanham Act. 15 U.S.C. § 1125(d). As with a proceeding under the UDRP, however, the trademark owner must establish bad faith to prevail.
Where no bad faith is involved, the trademark owner may seek recovery for trademark infringement and/or dilution. To establish trademark infringement under 15 U.S.C. section 1125(a) in the Ninth Circuit, an eight-factor test is applied. These factors, named the "Sleekcraft factors" after the decision AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), are: (1) the similarity of the conflicting designations; (2) the relatedness or proximity of the two companies’ products or services; (3) the strength of the mark alleged to have been infringed; (4) the marketing channels used by the two companies; (5) the degree of care likely to be exercised by purchasers in selecting goods (the more discerning the shopper, the less chance confusion will occur); (6) the alleged infringer’s intent in selecting its mark; (7) evidence of actual confusion of consumers; and (8) the likelihood of expansion in product lines.
In addition to trademark infringement, the owner of a "famous" trademark may seek redress for trademark dilution under 15 U.S.C. section 1125(c). For this claim, the trademark owner must establish that (1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendant’s use began after the plaintiff’s mark became famous; and (4) the defendant’s use presents a likelihood of dilution of the distinctive value of the mark. Unlike trademark infringement, trademark dilution requires a famous mark. As the Ninth Circuit has explained, "[d]ilution is a cause of action invented and reserved for a select class of marks — those marks with such powerful consumer associations that even non-competing uses can impinge on their value." AVERY DENNISON CORP. v. SUMPTON, 189 F.3d 868, 875 (1999).
In addition to federal statutory claims, a trademark owner seeking redress in the courts may assert a variety of state law claims not analyzed here. These claims include infringement for registered trademarks (Bus. & Prof. Code § 14320), trademark dilution (Bus. & Prof. Code § 14330), use of a mark in comparative advertising (Bus. & Prof. Code § 14335), and unfair competition (Bus. & Prof. Code § 17200).
Whether representing a trademark owner or an alleged infringer involved in a domain name dispute, factual investigation is the key to deciding how to proceed. If your client is the domain name registrant, the first question to ask is whether there is available insurance coverage. Domain name disputes may qualify for coverage under "advertising injury" provisions of general commercial liability policies, although insurance carriers have begun narrowing the scope of such provisions by excluding Internet-related activity.
Does either party have enforceable trademark rights? Because trademarks arise from use in commerce, there can be situations where both the domain name registrant and the party alleging infringement own trademark interests in the mark at issue. In such circumstances, it is important to determine who first actually used the mark in the sale of goods or services. The first to use the mark has priority of use of the mark, and can enjoin "junior" users from using confusingly similar marks in the same industry and market or within the "senior" user’s natural zone of expansion. In other words, a domain name registrant has a strong defense to an infringement action if it can establish priority of use.
Assuming the domain name owner does not have priority of use or any trademark interest in the domain name, the next step is to determine whether the trademark at issue has been abandoned, whether the trademark owner has acquiesced in the domain name owner’s actions, and how long the trademark owner has waited to seek redress. Abandonment, estoppel and laches are all defenses to trademark infringement.
Is There A Viable Claim For Trademark Infringement? After sorting out who has a protectible trademark interest, the next step is to analyze the Sleekcraft factors to determine the strength of a possible trademark infringement claim.
- Are the domain name and trademark confusingly similar? Courts assess similarity of the marks in terms of their sight, sound and meaning. Domain names have been found to be confusingly similar to a trademark when they incorporate or purposefully misspell the trademark. For example, in a recent UDRP proceeding, "wallstreetjournel.com" was found to be confusingly similar to The Wall Street Journal's trademark.
- Are the products or services of the two companies related? If the companies sell the same products or services, infringement is more likely to exist. Conversely, if the products or services differ, a court is less likely to find infringement. For instance, a district court in Massachusetts recently found that a company called "Clue Computing," which had registered the domain name "clue.com," did not infringe the game manufacturer Hasbro’s registered trademark "Clue," relying heavily on the fact that the computing services provided by Clue Computing had little if any similarity with the games manufactured by Hasbro. Hasbro, Inc. v. Clue Computing, Inc., 66 F. Supp. 2d 117 (D. Mass. 1999).
- How strong is the trademark alleged to have been infringed? The stronger a mark, the greater the protection it is accorded by the trademark laws. Weak marks are those which are merely generic, descriptive or suggestive. Strong marks are those which are arbitrary or fanciful. For example, "Lite Beer" is a generic and therefore weaker mark than the fanciful mark "Clorox" bleach.
- Do the domain name registrant and trademark owner use the same marketing channels? The Ninth Circuit recently stated that the likelihood of confusion is exacerbated where both parties "use the Web as a marketing and advertising facility." BROOKFIELD COMMUNICATIONS, INC. v. WEST COAST ENTERTAINMENT CORP., 174 F.3d 1036, 1057 (9th Cir. 1999). Given that most companies use their websites as a sales and advertising tool, this factor is likely to be easily established in domain name disputes.
- What degree of care is likely to be exercised by purchasers of the products in question? Confusion is less likely to be found where the product or service at issue is more expensive. This is because "reasonably prudent consumers" are expected to be more discerning when purchasing expensive goods. On the other hand, confusion is more likely to be found in the case of less expensive products, as customers are likely to exercise less care when purchasing such items.
- What was the alleged infringer’s intent in selecting its mark? Courts will find that confusion exists if the mark is purposefully adopted to deceive the public.
- Is there any evidence of actual confusion of consumers? Actual confusion of consumers is strong evidence in support of infringement. Find out whether customers of the trademark owner have mistakenly contacted the domain name holder’s website.
- Is there any likelihood of expansion in product lines? If the domain name holder is planning on expanding its product line by offering products similar to those offered by the trademark owner, confusion is more likely to be found.
Is There a Viable Claim for Trademark Dilution? Unlike trademark infringement, likelihood of confusion is irrelevant for a dilution claim. Without going into a detailed analysis of the factors required for a dilution claim, suffice it to say that the key element is a famous mark. Eight considerations are listed in the Federal Trademark Dilution Act for determining whether a mark is famous. These considerations focus on the duration and extent of use of the mark, the scope of the advertising and publicity of the mark, the degree of the mark’s distinctiveness and recognition, whether similar marks are used by third parties and whether the mark was registered on the principal register. See 15 U.S.C. § 1125(c)(1)(A)-(H).
As a final note of caution, if, after conducting factual investigation you decide that your client owns an infringing domain name, do not advise the client to sell the domain name to the trademark owner absent a release of all potential claims arising from the registration and use of the domain name. Offers to sell domain names are indicia of bad faith, and could result in the transfer of the domain name to the trademark owner.
In the end, the best defense is a good offense. Clients should be advised to run trademark searches before registering domain names which might potentially infringe the trademark of another. Trademark owners need to be aggressive in registering domain names across all available top level domains (e.g., .com, .org., .net and the new gTLDs) and vigilant in making sure no confusingly similar marks are improperly registered. Lawyers, too, can help fend off domain name disputes, both by keeping an eye on the ICANN website for news of new rules pertaining to domain name registrants, and by keeping abreast of the new law which will inevitably result from the problems the domain name system has created for trademark owners.