Monday, November 28, 2011

The Wayward ACPA Part 3: Nefarious

This is the third installment from my TPRC paper, The Wayward AntiCybersquatter Consumer Protection Act A Survey of 11 Years of ACPA Caselaw.  In this post we explore the origins of the ACPA - the historical context that led to this legislation.

Photo by Kevin Dooley
Tales of Horrors

The 106th Congress confronted a problem: the public Internet. As the public Internet exploded onto the communications scene, it crashed into trademark law. Early settlers of cyberspace grasped the value and staked claims. They believed that if they could grab valuable domain names, they could squat on them until some late-to-the-game business showed up needing that particular domain name, willing to fork over cash. With the promise of easy money, some squatters perfected their scheme, creating warehouses of hundreds if not thousands of domain names and netting profit from companies desperate to gain an online presence in the early panicked days of the Internet Bubble.

By 1998, consternation crescendoed. The courts attempted to apply existing trademark law, but with limitations. A trademark infringement requires that the mark be used in commerce; if a cybersquatter registers hundreds of domain names but then never uses them, is that "use" in commerce? The Courts ultimately resolved that it was. However, the courts could not overcome the next problem: registration of domain names with false information. Existing trademark law provided a remedy against a person, not a thing. If the domain name registration was fraudulent or if the registrant could not be found, the courts concluded that they had no ability to provide a TMO with an in rem remedy against the property.

TMOs recounted tales of horrors before Congress. They told tales of extortion, warehousing, land-grabs, fraud, misdeeds, and atrocities. They conveyed the necessity of Congressional action to respond to opportunistic pirates preying on consumers and American businesses.

Warehousers

The first tales of woe involved warehousing of domain names by cybersquatters, who would then attempt to extort ransom, frequently successfully, from bewildered TMOs. As with the Wild West, some characters took it to the extreme, and warehouses could be extensive. A London computer club reportedly attempted to corner the market on all four letter domains, starting with aaaa.com and working through to zzzz.com, and had registered over 75,000 domain names. Another cybersquatter had registered such names 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. "

Cybersquatters demanded good compensation for their efforts. One cybersquatter reported listed 911porche.com for the sales price of $60,911, "with a caption that reads 'PORSCHE: DO I NEED TO SAY ANYTHING?'" Another cybersquatter asked $350,000 from Warner Brothers in exchange for warnerrecords.com, warner-bros-records.com, warner-pictures.com, warner-bros-pictures, and warnerpictures.com. A cybersquatter requested $100,000 from Umbro International for the use of umbro.com. Other domains were regularly listed for sale to the highest bidder.

The creation of new companies resulted in exciting opportunities for cybersquatters. Companies had not yet learned to register potential domain names first and then announce new company names. Announcements of new company names would be made, appropriate staff would be sent to register domain names, and those domain names, and multiple permutations, would already be registered. " [W]hen 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. " This also happened when Bell Atlantic and NYNEX merged to become Verizon.

Redirectors

Tales of redirection took two flavors. First, TMOs would find that domain names associated with their marks would redirect visitors to nefarious content, such as pornography and fraud. Congress noted that if you typed dosney.com, you would end up at a pornography site. The domain names attphonecard.com and attcallingcard.com, not associated with AT&T at that time, directed individuals to websites claiming to sell calling cards while swiping visitors' personal information and credit card numbers. Some of these domain names would redirect visitors to another website that might compete directly with the TMOs line of business. The legislative history pointed to websites that had a Disney, Microsoft, or Dell name in the domain name, taking advantage of those companies' trademarks, but were not in fact affiliated with those companies.

In Rem

TMOs had run into a roadblock on the borderless Internet. Domain name registrations could contain false information concerning the registrant, or the registrant was outside the jurisdiction of US courts. While TMOs might be able to establish clear trademark violations, trademark law at that time provided no in rem remedy. If they could not haul the person into court, they could not gain satisfaction.

Gregory D Phillips, of the firm Howard, Phillips & Andersen, which represents Porsche, testified before Congress about the travails Porsche experienced in defending its trademark online. Mr. Phillips testified that over 300 domains had been registered that used the Porsche mark, with additional domain name registrations being uncovered every week. These domain names are registered by various different people in various different places around the world. But most troubling for Mr. Phillips, many of these domain names are registered with false contact information. porsch.com (which redirected to a pornography site) was registered under the false name "Domain 4 Sale & Company" at a false address. Without accurate contact information, prior to the ACPA, TMOs had no avenue for redress. Porsche attempted to protect its mark by bring an in rem action against porsh.com but was told by a Federal Court in Virginia that even though the claim would appear to be a violation of the Trademark Dilution Act, the Act provided no in rem remedy and the court could not grant the relief Porsche sought. Mr. Phillips and the other experts at the 1999 Senate hearing described the need for ACPA to provide an in rem remedy as crucial. 

Next Post :: A Targeted Solution
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