Friday, February 04, 2011

The Wayward Anti-Cybersquatting Consumer Protection Act

The Anti-Cybersquatting Consumer Protection Act (ACPA) has lost its way. The ACPA was passed in an era of domain name land grabs, where nefarious individuals would register and warehouse oodles of valuable domain names, and then extract ransom from bewildered-trademark owners. These nefarious individuals are known as "cybersquatters", and, according to the ACPA, they are bad. The Ninth Circuit, in an early reading of the ACPA, stated,

"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) .The Sixth Circuit stated

“[t]he paradigmatic harm that the [Anticybersquatting Consumer Protection Act] was enacted to eradicate [was] the practice of cybersquatters registering several hundred domain names in an effort to sell them to the legitimate owners of the mark."

Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d 806, 810 (6th Cir. 2004).

Trademark owners already had trademark law to protect them. The specific predicament that the ACPA was passed to rectify involved

  • oodles of domain names,
  • nefarious individuals,
  • the registration of domain names before bewildered trademark owners realized they needed them, and
  • extortion.

But that's not how the ACPA is being used today. More often than not, the ACPA has simply become yet another weapon in nefarious trademark owners' arsenals to use against speakers that the trademark owners generally wish, for one reason or another, would go away. And the Courts have facilitated this evolution by their misapplication of the ACPA criteria, permitting ACPA actions to succeed where there aint no warehousing, there aint no multiple domains, there aint no extortion, and there aint nothing nefarious – there's just speech that the trademark owner doesn’t like.

Today's case is a poster-child example of a court's failure to apply the ACPA in a way that has anything to do with cybersquatting. Carnivale v. Staub, LLC, Civ. No. 08-764-SLR, DDel Dec. 13, 2010. In this case we have Plaintiff, who wrote a book entitled "The Affordable House," registered the domain name affordablehouse.com in 1998. At Plaintiff's website, visitors can review and purchase home design plans. In 2005, Plaintiff filed a trademark application for THE AFFORDABLE HOUSE, which was granted in 2006. The Court in a previous decision concluded that THE AFFORDABLE HOUSE is a distinctive trademark (a visit to Plaintiff's website provides no readily apparent indication that "The Affordable House" is trademarked).

Okay, wait. Will someone please tell me how THE AFFORDABLE HOUSE is a distinctive trademark? Distinctive? As this court stated in its previous decision, "The test for genericness in this Circuit is the primary significance test: whether the primary significance of the term in the minds of the consuming public is the product or the producer." So let me ask you, man-on-the-street, if I say to you, "the affordable house," what do you think of? Do you think of Plaintiff? Or do you think of the house down the street that is run down that is, what might otherwise be known as, a handy-man's dream. When I Googled the term "The Affordable House," I received 40,000 responses, including

Okay, whatever, we are not here to debate this point (but it is probably already a good indication of things heading south).

Defendant is a house building company that promotes the use of Autoclaved Aerated Concrete (AAC), "a lightweight concrete building material… an integrated product that is architectural stunning and diverse, healthy, environmentally responsible, comfortable, safe and economically competitive in all market segments." Staub's Website. In 2000, Defendant built a house out of AAC that it referred to as "The Affordable House." In 2004, Defendant decided to set up a website, and seeing that "affordablehouse.com" had been taken, decided to register "theaffordablehouse.com" (domain name appears to be currently parked although WHOIS indicates that it remains registered to the Defendant). All registration information was accurate. Defendant set up a website where it provided information about the building material AAC. All of this happened before Plaintiff applied for a trademark.

Things go bad in 2007. Three years after Defendant started operating his site, Plaintiff finally noticed that it was there (probably a good indication there wasn’t much conflict between the two). Plaintiff sent Defendant a cease and desist letter, and Defendant took down the website at "theaffordablehouse.com." Defendant did not offer to sell the domain name to Plaintiff; of course, Defendant did move to cancel Plaintiff's trademark registration (that proceeding was stayed by PTO pending the outcome of this proceeding – which also doesn’t make sense to me).

Okay, stop – who wins? Just on gut feeling, is Defendant a cybersquatter? Has Defendant done anything that anyone familiar with domain names would construe as "bad faith"? There is no warehousing. There are no multiple domains. There's no falsification of the registration records. Defendant does not offer to sell the domain name. Defendant was using the website for his own content. That doesn’t sound like a Cybersquatter to me.

Let's see what the court thinks. The Court apparently previously concluded that Plaintiff owned a trademark and that it was distinctive. At issue in this decision is bad faith (i.e., being nefarious). The court lists the nine factors that Congress set forth for bad faith consideration, and then mechanically plows through them, tossing points to the parties.

Bad Faith Score Board
Factor
Point Plaintiff
Point Defendant
(1) Trademark rights in name: Defendant didn’t receive a trademark from the PTO for "Affordable House"; Plaintiff did.
1

(2) Legal Name or Nickname of Defendant: "Affordable House" is not Defendant's name.
1

(3) Prior Use of Domain Name: Defendant's use of "Affordable House" does not predate Plaintiff's use of the term (this is inconsistent with other courts that concluded the relevant point in time is the registration of the trademark, not the use of the term)

1

(4) Non Commercial or Fair Use: Since Defendant's website is commercial, according to the court, it cant be fair use (even though Defendant and Plaintiff are in different lines of business and the term itself is generic).
1

(2) Intent to Divert Customers: Because the domain names are similar, Defendant was seeking to drive traffic to Defendant's website, and parties compete "for at least part of their client bases," the Court concludes that Defendant intended to divert customers (this is inconsistent with other courts that acknowledge that the whole purpose of a domain name is to drive traffic to a sight, and do a more in depth analysis of whether a defendant had a bad faith intent to divert traffic away from plaintiff and whether the parties directly competed, which they apparently do not in this case.).
1

(6) Offer to Sell Domain Name: Defendant did not offer to sell the domain name.
1
(7) Misleading Information in the Domain Name Registration: The Domain Name registration was accurate.
1
(8) Registration of Multiple Domain Names: Only one domain name was registered by Defendant that is at issue in this case.
1
(9) Extent to Which the Trademark is Distinctive: The Court has already concluded that "The Affordable House" is distinctive.
1

Final Score:
6
3

We have a winner!

Note something about the way in which the Court does its analysis. It simply awards points to the parties without balancing the factors. But if that's the way the analysis is conducted, then in any situation where there is a generic trademark owner against a generic domain name owner and no cybersquatting (no warehousing, domain name parking, extortion, etc.), the trademark owner would always win. Always. That seems to completely miss the point of this legislation. The ACPA was not enacted as merely another means of protecting trademarks; the ACPA was enacted to specifically address cybersquatting. Otherwise the ACPA would simply be a duplicative articulation of the Lanham Act, adding little. And as we all know from first year law school statutory construction, it is presumed that Congress intentionally enacts new legislation to address a problem, and does not pointlessly duplicate existing statutes.

The factors that directly relate to bad faith, as opposed to mere trademark infringement, go in favor of Defendant. There is only one domain name. There is no extortion. There is no misinformation in the domain name registry. Defendant used the domain name before plaintiff registered the trademark. And the parties are in different lines of business. The ACPA, applied in situations where no cybersquatting is transpiring, is merely an unnecessary echo of the Lanham Act, and that is inconsistent with the principles of statutory construction.

Okay, I will conclude with this thought: One law firm writing about this case concluded (and I paraphrase):

Here's our advice: when registering a domain name, you should hire us to conduct a thorough trademark search in order to make sure you are not infringing a trademark and get sued.

Wait, what?!? In 2004, at the time of registering his domain, had Defendant conducted a trademark search, the search would have produced no trademarks. At the time of registering the domain name, there was no way for Defendant to know that there was a problem. The name of a book is not necessarily a trademark; the name of a website is not necessarily a trademark; and the terms in question were pretty generic with lots of prior art. So how could Defendant possibly have bad faith in the domain name registration when there was no trademark at the time?

Probably the better advice for Defendant would be that the moment Defendant had set up a legitimate website, Defendant should have applied for a trademark, preempting Plaintiff. But then, requiring every single website owner to register a domain name when setting up a website, with the victory pretty much being the one that wins the race to the courthouse steps, gets us into the land of legal silliness.

Even better advice would be for the Courts to recognize that the ACPA is not the Lanham Act, and more strictly require clear demonstrations of bad faith before whacking innocent website owners.

I mean, I'm just saying….

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