Introduction

With the introduction of competition in the area of Internet/domain name registration services, a domain name can now be obtained for as little as $70 for a two-year period. However, a good ".com" address can be worth millions. It is therefore no surprise that legal squabbling has ensued between the individuals who first realized the value in a good domain name, and the businesses who have now discovered the importance of E-commerce and fear that their trademark rights are being trampled. This new form of piracy on the Internet has been appropriately dubbed: "cybersquatting."

From the very beginning, the Internet has spawned a host of problems for trademark owners. The process of registering domain names was itself part of the problem. Additionally, existing trademark laws often did not fully address the cybersquatting situation, and thus trademark owners had to search (usually without much success) for creative ways of ousting cybersquatters who had seized control of their valuable trademarks on the Internet. With the registration process now in the hands of 98 entities (and growing) instead of a single entity, and with the creation of additional top-level domains (for instance, a brand new top level domain - .cc - has recently been introduced, and it is being heavily promoted as "the .com alternative"), it appeared as though cybersquatting was going to continue to be a concern.

Until June 1999, registration services in the .com, .net and .org domains were provided solely by one company - Network Solutions, Inc. ("NSI") - under a 1992 Cooperative Agreement with the U.S. Government. That agreement was amended on October 6, 1998, and the process of opening the Internet domain name system's largest and most widely used domains to competition was launched with a test-phase that began on April 26, 1999. Around the same time, the Shared Registration System ("SRS") was created, which is a central registry operated and maintained by NSI.

Under the new domain name registration system, entities wishing to provide domain name registration services must first be accredited by the Internet Corporation for Assigned Names and Numbers ("ICANN"). Once accredited, competing registrars are permitted to register names using the SRS, thus at least providing consumers with some level of assurance that .com, .net and .org domain names cannot be registered without going through one of the ICANN-accredited registrars, each of whom grants domain names based on a common database (i.e., the SRS).

The introduction of competition, however, did nothing to inhibit the practice of cybersquatting. "Cybersquatting" refers to the deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners. Simply put, it is the practice of registering well-known company names or trademarks as Internet addresses in order to sell the name or mark , for profit, to the company involved. These actions occur because of the ease that is involved in registering Internet domain names: as mentioned previously, registering is now cheaper than ever, and anyone can register a domain name as long as the identical name (including the suffix portion, such as .com or .net) is not already taken. A variety of web sites now exist that offer registration services.

Thus, for example, say Coca-Cola was the first to claim www.coke.com. If they did not also claim www.coke.net at the same time, there would have been nothing in the registration process to prevent someone else from registering www.coke.net (which is different enough to satisfy the requirements of the domain name registration process because one ends in ".net" and one ends in ".com"). That entity could then demand that Coca-Cola pay a large sum of money in order to obtain the coke.net domain name. Similarly, a company who registered www.uturn.com could find itself in competition with another entity operating at www.u-turn.com, as the mere addition of a hyphen would be enough for someone to obtain the rights in www.u-turn.com despite the existence of a prior registration for www.uturn.com.

Cybersquatters target distinctive marks for a variety of reasons. The obvious (and not surprisingly, the most popular) reason cybersquatters register well-known brand names as Internet domain names is to extract payment from the rightful owners of the marks. This new form of "ransom" in the electronic age forces some companies to pay third parties for the right to engage in electronic commerce under their own trademarked brand name. In fact, some companies had to buy their own names for millions of dollars from Internet speculators who profited only because they had registered the name first. In addition, political candidates are also likely targets of cybersquatters. For example, one man from Miami had registered an entire roster of related names for Presidential candidate George W. Bush, and is trying to sell the names for $500,000 to Bush's campaign.

Even law firms have been targets of some of the bolder cybersquatters. One individual in New Jersey recently found himself on the receiving end of a lawsuit filed by several major national law firms whose names this individual had intentionally registered as domain names. When several of the firms in question first discovered that their names had already been taken, they contacted the individual, who in response to their inquiries offered to sell the names for $1,000 each. Clearly, as in most instances of cybersquatting, this individual's main motive was personal financial gain.

Other cybersquatters register well-known names in order to take advantage of consumer confusion, the goal being to divert customers from the mark owner's site to the cybersquatter's own site, accumulating advertising revenue based on the number of visits the site receives. One example of such cybersquatting was brought to the attention of the United States Senate's Commerce Committee, which has jurisdiction over Internet commerce. The Committee was informed of a parent whose child mistakenly typed in the domain name for "dosney.com," expecting to access the family-oriented content of the Walt Disney company, only to end up with hard-core pornography.

Finally, cybersquatters target distinctive marks in order to defraud consumers, including attempts to engage in counterfeiting activities. This was illustrated to the Commerce Committee when it heard testimony regarding a cybersquatter who registered the domain names "attphonecard.com" and "attcallingcard.com." The individual used those names to establish sites claiming to sell calling cards and soliciting personally identifying information, including credit card numbers.

The cybersquatting problem is unique in that many companies tried in vain to protect themselves from cybersquatting by resorting to trademark law, which would appear at first glance to be the obvious solution. However, trademark principles have been somewhat unsuccessful in combating the problem, because the courts have concluded that most cybersquatters are not engaging in commercial use of the mark -- they are simply sitting on the domain name until the company realizes that they would like to register it, only to discover the cybersquatter has beat them to it. Because the trademark laws do not bridge this important gap and do not consistently offer protection to the rightful owners of the trademarked names, federal legislation barring the practice was passed in November 1999.

The "Anticybersquatting Consumer Protection Act of 1999" will hopefully address the problems outlined above. The Anticybersquatting Act, which amends the Trademark Act of 1946 (commonly referred to as "the Lanham Act"), gives the owner of a mark protection from cybersquatters. The marks which may be protected include not only federally-registered trademarks, but also protected personal names as well as common-law rights in unregistered marks. The Act provides a civil remedy, allowing the owner of an affected mark to bring a suit against any person who, with a bad-faith intent to profit from that mark or personal name, registers, traffics in, or uses a domain name that is identical or confusingly similar to a distinctive mark (or that is dilutive of a famous mark). The legislation then lists nine factors that the courts can consider in determining whether there was a bad-faith intent, but the courts may consider any additional evidence probative on the issue of bad-faith intent above and beyond these nine factors.

The Anticybersquatting Act authorizes various forms of relief, including, in some situations, a court order for the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark. The Act also provides for injunctions, actual damages, or possibly statutory damages (which could range anywhere from $1,000 to as much as $100,000 per domain name). Finally, the Anticybersquatting Act prescribes situations where a domain name registrar would be liable or not liable in actions instituted by the owner of the mark.

Although it is too early to tell how successful the Anticybersquatting Act will be, it is a positive step in offering protection to businesses who have trademarked their brand names where previously little or no protection existed. However, as e-commerce continues to grow and businesses become even more reliant upon it, undoubtedly new challenges will arise that affect intellectual property rights. Particularly with the introduction of new domains, such as .cc, it is likely that cybersquatters will continue to seek new ways to exploit the Internet and thereby profit from the good-will established by the rightful owners of valuable trademarks throughout the world. Consequently, businesses will need to know how to protect themselves and their legal rights.

Copyright 2000 Marc J. Farrell, Esq.