Tuesday, February 07, 2012

ACPA Part 6: The Scorecard

Photo by J McPherskesen
The courts reject the notion that they mechanically churn through the 9 Bad Faith Factors, allotting points to the different parties, adding up the score, and declaring victory for the party with the highest score. But hat is exactly what the courts have done. They have created a scorecard, they go down the factors and they score points for either the Trademark Owner (TMO) or the Domain Name Owner (DNO). The courts have misunderstood the factors handed down to them by Congress and are using the wrong scorecard.

The nine factors fall within two groups. Understanding the difference between the two groups is key to understanding how to correctly apply them. As stated by the legislative history, "The first four [factors] suggest circumstances that may tend to indicate an absence of bad-faith intent to profit from the goodwill of a mark, and the others suggest circumstances that may tend to indicate that such bad-faith intent exists." H.R.Rep. No. 106-412, 1999 WL 970519, at *10.  The Courts are in accord, stating "The first four factors have been seen as reasons why a defendant might in good faith have registered a domain name incorporating someone else's mark, and the other five are indicia of bad faith intent."  Coca Cola v. Purdy, 382 F3d 774, 783 (8th Cir. 2004).

All of the factors concern the behavior of the DNO and have nothing to do with the behavior of the TMO. 

Good Faith (Mitigating Circumstances)

The first four factors demonstrate whether the DNO had good faith; these are affirmative, mitigating factors. Either these factors substantiate good faith, or they do not. If the DNO is successful under one of these factors, the DNO has made a demonstration of good faith. The opposite is not true. If the DNO is not successful under one of these factors, this does not establish anything about bad faith, and it does not establish anything about the TMO. The fact that the domain name in question is not the DNO's legal name does not mean that the DNO is engaged in bad faith; it simply means that this mitigating defense is not available to the DNO. Either these factors favor the DNO, or they do not; they never disfavor the DNO and they never favor the TMO.

Bad Bad Faith Factors

Likewise, the bad faith factors are negative factors. Either they substantiate bad faith, or not. The failure to be successful under a bad faith factor does not establish good faith. Likewise, demonstrating bad faith under one of these factors demonstrates something about the DNO, and says nothing about the TMO. Either these factors disfavor the DNO, or they do not; they do not favor the DNO and they do not favor the TMO.

The Bad Faith Factors themselves fall into two sub-groups. In enacting the ACPA, Congress was addressing two situations: cybersquatters who redirected domain names for nefarious purposes (pornography, fraud, crime) (Factor 5), and cybersquatters who held the domain name for ransom, attempt to extort the TMO (Factor 6). Cybersquatting is, by definition, either Factor 5 or Factor 6, or both (with discretion available for situations of unique circumstances that do not squarely fall within either, but are nevertheless nefarious). If you don’t have Factor 5 or 6, you don’t have cybersquatting (you may have something else, but its not cybersquatting). These are the two lynch pin factors upon which bad faith rests.

Factors 7, 8, and 9 are aggravating circumstances. As noted by Congress, each one of them, in and of themselves, is not a problem, and do not necessitate a violation under the ACPA. The fact that one might have inaccurate information in my domain name registration may be the result of a bookkeeping error; it may be that I am a dissident trying to keep privacy. It does not mean that one is involved cybersquatting. Likewise, registering multiple domains is not itself problematic. Corporations will generally register multiple domains for every business plan and product line they have. Governments have warehouses of domain names. The aggravating circumstances factors amplify the problematic activity of Factors 5 and 6. When misinformation in the registration is tied to Factor 6 extortion, that is greater evidence of a problem and what the appropriate remedy ought be. When one competitor has registered 100 domain names, all like the other competitor's trademark, and is redirecting traffic, that is aggravating evidence of a problem. When the domain name in question is famous, it is also greater evidence of nefarious activity. Factors 7, 8, and 9 are not necessary to an ACPA cause of action. However, where they exist, they provide greater evidence concerning the degree of nefarious activity and what the appropriate remedy ought be.

The courts have been grinding through the nine factors, allotting points for one party or the other, making no differentiation between the Good Faith Factors and the Bad Faith Factors, and making no note of the lynch-pin factors #5 & #6, and the mitigating or aggravating factors. In the end, the courts tally up the points and the party with the highest score always wins (sometimes going through contortions in order to ensure that the “proper” party wins). The scorecard used by the courts generally looks like this:

Bad Faith Factor ScorecardTMODNO
F1: Trademark of DNO in Domain Name--
F2: Legal name of DNO as Domain Name--
F3: Prior use by DNO of Domain Name--
F4: Fair use by DNO of Domain Name--
F5: Intent to Divert Traffic--
F6: Internet to Profit Through Sale of Domain Name--
F7: Misinformation in Registration--
F8: Multiple Domain Name Registrations--
F9: Famous Tradmark of TMO--
Tally Score:00

The scorecard should actually look more like this, with all points going either for or against the DNO, and no points going to the TMO:

Good Faith Factors
(mitigating circumstances, optional)
Bad Faith Factors
Aggravating Circumstances
F1 DNO Trademark in Domain Name
F2 DNO Legal Name
F3 DNO Prior Use
F4 DNO Fair Use
F5 Intent to Divert
F6 Extortion
F7 Misleading Registration
F8 Multiple Domain Names
F9 Famous TMO Mark

If F5 or F6 is present, then the presence of F1 through F4 make a finding of bad faith less likely
At least one Cybersquatting Factor must be present*
If F5 or F6 is present, then the presence of F7 through F9 make a finding of bad faith more likely

What difference does it make? We will in coming posts observe a small collection of cases, at the fringe of the map, navigating turbulent waters with an unsure judge captaining the ship.  In these cases, using the right score cards means the difference between finding Davey Jones' Treasure, and battening down the hatches.

Next: 67 Cases
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