Cybersquatting Bad!

This is the first of a series of posts on the Anti-Cybersquatting Consumer Protection Act (ACPA). This first post reviews the ACPA's legislative history.

On-line extortion in any form is unacceptable and outrageous. Whether it's people extorting companies by registering company names, misdirecting Internet users to inappropriate sites, or otherwise attempting to damage a trademark that a business has spent decades building into a recognizable brand, anyone engaging in cyber-squatting activity should be held accountable for their actions. --Sen. Abraham, Sponsor of the ACPA

"Cybersquatting is the Internet version of an unlawful land grab. Cybersquatters register well-known brand names as Internet domain names in order to force the rightful owners of the marks to come forward and pay for the right to engage in electronic commerce under their own name." Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 946 (9th Cir. 2002) .

In the late 1990s, in the cacophony of disagreement over domain names and Internet governance, there was one issue over which there was rough consensus: cybersquatters bad! Back in the late 1990s, the White House singled out cybersquatting as bad in a DNS White Paper; Federal Courts have had a disdain for Cybersquatters; and the 106th Congress, a Congress which was gridlocked, found rough consensus to pass the AntiCybersquatting Consumer Protection Act (ACPA).

Purpose: "The purpose of the bill is to protect consumers and American businesses, to promote the growth of online commerce, and to provide clarity in the law for trademark owners by prohibiting the bad-faith and abusive registration of distinctive marks as Internet domain names with the intent to profit from the goodwill associated with such marks-a practice commonly referred to as ''cybersquatting.'" [Senate Report Leg His]

Discussion Derived From: The AntiCybersquatting Consumer Protection Act, Report 106-140, 106 th Cong., 1 st Sess. (Aug. 5, 1999) (Legislative History):

Trademark owners are facing a new form of piracy on the Internet caused by acts of ''cybersquatting,'' which refers to the deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners. For example, when Mobil and Exxon announced their proposed merger in December, 1998, a speculator registered every variation of the possible resulting domain name, i.e., mobil-exxon.com, exxon-mobil.com, mobilexxon.com, etc., ad infinitum. In another example of bad-faith abuses of the domain name registration system, Network Solutions- the domain name registry that administers the Internet's ''.com,'' ''.net,'' ''.org,'' and ''.edu'' top level domains-pulled on a London computer club in May, 1999, that had registered over 75,000 domain names using an automated computer program.1 Their aim was to lock up all available four letter domains by systematically reserving every possible combination of letters, starting with aaaa.com, then aaab.com, aaac.com, up to zzzz.com, until every available combination had been reserved.

The practice of cybersquatting harms consumers, electronic commerce, and the goodwill equity of valuable U.S. brand names, upon which consumers increasingly rely to locate the true source of genuine goods and services on the Internet. Online consumers have a difficult time distinguishing a genuine site from a pirate site, given that often the only indications of source and authenticity of the site, or the goods and services made available thereon, are the graphical interface on the site itself and the Internet address at which it resides. As a result, consumers have come to rely heavily on familiar brand names when engaging in online commerce. But if someone is operating a web site under another brand owner's trademark, such as a site called ''cocacola.com'' or ''levis.com,'' consumers bear a significant risk of being deceived and defrauded, or at a minimum, confused. The costs associated with these risks are increasingly burdensome as more people begin selling pharmaceuticals, financial services, and even groceries over the Internet. Regardless of what is being sold, the result of online brand name abuse, as with other forms of trademark violations, is the erosion of consumer confidence in brand name identifiers and in electronic commerce generally.

Cybersquatters target distinctive marks for a variety of reasons. Some register well-known brand names as Internet domain names in order to extract payment from the rightful owners of the marks, who find their trademarks ''locked up'' and are forced to pay for the right to engage in electronic commerce under their own brand name. For example, several years ago a small Canadian company with a single shareholder and a couple of dozen domain names demanded that Umbro International, Inc., which markets and distributes soccer equipment, pay $50,000 to its sole shareholder, $50,000 to an Internet charity, and provide a free lifetime supply of soccer equipment in order for it to relinquish the ''umbro.com'' name. The Committee also heard testimony that Warner Bros. was reportedly asked to pay $350,000 for the rights to the names ''warnerrecords. com'', ''warner-bros-records.com'', ''warner-pictures.com'', ''warner-bros-pictures'', and ''warnerpictures.com''.

Others register well-known marks as domain names and warehouse those marks with the hope of selling them to the highest bidder, whether it be the trademark owner or someone else. For example, the Committee heard testimony regarding an Australian company operating on the Internet under the name ''The Best Domains,'' which was offering such domain names as ''911porsche.com,'' at asking prices of up to $60,911, with a caption that reads ''PORSCHE: DO I NEED TO SAY ANYTHING?'' The Committee also heard testimony regarding a similarly enterprising cybersquatter whose partial inventory of domain names-the listing of which was limited by the fact that Network Solutions will only display the first 50 records of a given registrant-includes names such as Coca-Cola, Pepsi, Burger King, KFC, McDonalds, Subway, Taco Bell, Wendy's, BMW, Chrysler, Dodge, General Motors, Honda, Hyundai, Jaguar, Mazda, Mercedes, Nissan, Porsche, Rolls-Royce, Saab, Saturn, Toyota, and Volvo, all of which are available to the highest bidder through an online offer sheet.

In addition, cybersquatters often register well-known marks to prey on consumer confusion by misusing the domain name to divert customers from the mark owner's site to the cybersquatter's own site, many of which are pornography sites that derive advertising revenue based on the number of visits, or ''hits,'' the site receives. For example, 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 home page, only to end up staring at a screen of hardcore pornography because a cybersquatter had registered that domain name in anticipation that consumers would make that exact mistake. Other instances of diverting unsuspecting consumers to pornographic web sites involve malicious attempts to tarnish a trademark owner's mark or to extort money from the trademark owner, such as the case where a cybersquatter placed pornographic images of celebrities on a site under the name ''pentium3.com'' and announced that it would sell the domain name to the highest bidder. Others attempt to divert unsuspecting consumers to their sites in order to engage in unfair competition. For example, the business operating under the domain name ''disneytransportation.com'' greets online consumers at its site with a picture of Mickey Mouse and offers shuttle services in the Orlando area and reservations at Disney hotels, although the company is in no way affiliated with the Walt Disney Company and such fact is not clearly indicated on the site. Similarly, the domain name address ''wwwcarpoint.com,'' without a period following ''www'', was used by a cybersquatter to offer a competing service to Microsoft's popular Carpoint car buying service.

Finally, and most importantly, cybersquatters target distinctive marks to defraud consumers, including to engage in counterfeiting activities. For example, the Committee heard testimony regarding a cybersquatter who registered the domain names ''attphonecard.com'' and ''attcallingcard.com'' and used those names to establish sites purporting to sell calling cards and soliciting personally identifying information, including credit card numbers. We also heard the account of a cybersquatter purporting to sell Dell Computer products under the name ''dellspares.com'', when in fact Dell does not authorize online resellers to market its products, and a similar account of someone using the name ''levis501warehouse.com'' to sell Levis jeans despite the fact that Levis is the only authorized online reseller of its jeans.8 Of even greater concern was the example of an online drug store selling pharmaceuticals under the name ''propeciasales.com'' without any way for online consumers to tell whether what they are buying is a legitimate product, a placebo, or a dangerous counterfeit.

Congress viewed the legal remedies available for trademark owners before the passage of the ACPA as "expensive and uncertain." The ACPA was designed to thwart cybersquatters "who register numerous domain names containing American trademarks or tradenames only to hold them ransom in exchange for money." [Virtual Works Sec. II.A.1 ("The ACPA was enacted in 1999 in response to concerns over the proliferation of cybersquatting-the Internet version of a land grab.")]

Next Post: The Elements of an ACPA cause of action.