Wednesday, November 23, 2011

The Wayward ACPA: Act II: A Sour Story

This is the 2nd installment taken from my TPRC paper: The Wayward AntiCybersquatter Consumer Protection Act A Survey of 11 Years of ACPA Caselaw

We start and end with a story. Paul, owner and proprietor of the company FooBar, wishes to have a website on which to sell his wares. Paul contacts professional webdesigner Dan and explains his exciting plans for Foobar. Dan is an excellent webdesigner and the two parties come to an agreement whereby Paul hires Dan to construct a website along with the necessary registration of foobar.foo

Dan registers the domain name, constructs the website, and launches the site to a tremendous success. But, as happens time to time, the relationship between Paul and Dan "sours." Paul demands that Dan turn over the domain name and website to Paul. Dan agrees, as long as Paul pays all outstanding bills.

Without exploring the depths of the sour relationship, we know these things. Dan registered the domain name pursuant the agreement with Paul. Dan is not using the domain name to redirect traffic to a pornography site or any other site. Dan did not register the domain name for the purpose of extorting a ransom from Paul. Paul used accurate information when he registered the domain name. Dan has registered multiple domain names, but for the purpose of his webdesign business, not cybersquatting. Finally, Dan had no notion at the time of registration of the domain name that the registration was anything but lawful.

Is Dan a cybersquatter?

According to the 9th Circuit in DSPT International, Inc. v. Lucky Nahum, he is. The court concluded that Dan used Paul's trademark with a bad faith intent to profit. The Court stated
[The ACPA] may fairly be read to mean that it is bad faith to hold a domain name for ransom, where the holder uses it to get money from the owner of the trademark rather than to sell goods. The jury had evidence that Dan was using the “foobar.foo” domain name as leverage to get Paul to pay him the disputed commissions, [and not for a bona fide purpose]. Though there was no direct evidence of an explicit offer to sell the domain to Paul for a specified amount, the jury could infer the intent to give back the site to Paul only if Paul paid Dan the disputed commissions.
The “intent to profit” … means simply the intent to get money or other valuable consideration. “Profit” does not require that Dan receive more than he is owed on his disputed claim. Rather, “[p]rofit includes an attempt to procure an advantageous gain or return.” Thus, it does not matter that, as the jury concluded, Dan’s claim for unpaid commissions was meritless, because he could not hold the domain name for ransom even if he had been owed commissions.
Read that last sentence again. The court says that even if Dan contractual dispute with Paul reaps with merit, Dan (unlike every other professional) cannot say, "I will fulfill my obligations if you fulfill yours." Curious. Any time any Dan does any work that involves the registration of a domain name, it is a violation of the ACPA for Dan to condition completion of the work, for which he was hired, upon compensation. Registration of domain names as part of any business plan must be devoid of any desire for compensation. People who work on houses can place liens on houses until payment is received. People who work on cars can place liens on the titles until payment is received. But webdesigners cannot condition delivery of their work upon receipt of payment. 

I think the 9th Circuit misread the ACPA.

The 9th Circuit's decision in DSPT International made me wonder if the ACPA had gone astray. We now have 11 years of court decisions. Through that body of caselaw, we could explore for how courts have applied the bad faith factors. We can observe which factors the courts deem be most important, which are least important, which factors perhaps are being ignored, and which factors perhaps are being misapplied. By surveying 11 years of caselaw, we could explore whether the ACPA has gone astray. 

Next Installment:  Nefarious
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