Internet Means the Death of Borders :: Elvis is Everywhere :: #Nope

In the era of exceptionalism, the Internet was proclaimed as the death of borders.  Kinda like Elvis, the Internet was everywhere all the time.  Plaintiffs' lawyers heard that - and figured that meant any court had jurisdiction over any website ~ because that website was virtually in that jurisdiction.

The courts found the borders; they did not have jurisdiction over any website.

Okay, the facts on this one are straight forward.  Let's got to the video tape: Plaintiffs sell clothes.  Plaintiffs claims that Defendants (all 3343 of them), who are like in China, "sell counterfeit products that violate Plaintiffs' intellectual property rights . . . to consumers within the United States."  Plaintiffs sued in Illinois.

Jumping over a lot in the court's decision to get to the interesting stuff, there was just not a lot alleged that connected defendants to Illinois other than that they had websites.

So, over an individual defendant,  as a rule, a court has your general jurisdiction and your specific jurisdiction.  

As for general jurisdiction, the court sez:

[T]he exercise of personal jurisdiction here is based exclusively upon Defendants' alleged maintenance of interactive websites. Without more (and there is not more here), this fact alone is not enough to support general personal jurisdiction.  See, e.g., Richter v. INSTAR Enterprises Int'l, Inc., 594 F. Supp. 2d 1000, 1009 (N.D. Ill. 2009) ("[R]egardless how interactive a website is, it cannot form the basis for [general] personal jurisdiction . . . unless the contacts through the website are so substantial that they may be considered `systematic and continuous' for the purpose of general jurisdiction."); Euromarket Designs, Inc. v. Crate & Barrel Ltd., 96 F. Supp. 2d 824, 833 (N.D. Ill. 2000) ("Generally, the defendant's mere maintenance of an Internet website is not sufficient activity to exercise general jurisdiction over the defendant.").

As for specific jurisdiction, this means that the defendant had specific transactions and presence within the jurisdiction.  Plaintiffs said that each of the defendants transacted business in Illinois.  A few of the defendants surfaced and said... "um, no we didnt (and by the way, we are Irish not Chinese)."  The court said

jurisdictional allegations are accepted as true, but if a defendant submits evidence in opposition to the exercise of jurisdiction, plaintiff must go beyond the pleadings and submit affirmative evidence to support it) (citing Purdue Research Foundation v. Sonofi-Synthelabo, S.A., 338 F.3d 773, 782-83 (7th Cir. 2003)). Plaintiffs did not provide such evidence

Then plaintiffs' counsel flops back and argued "that he believed personal jurisdiction was proper as to all 3,343 defendants solely because they operated interactive websites that displayed copyrighted images and infringed Plaintiffs' trademarks."

To quote the court, "yeah.... no." Following plaintiffs logic, the court said, "personal jurisdiction would automatically exist in every state and presumably every country."  The court cited two cases where the court indeed found jurisdictions over websites, but the finding of specific jurisdiction was premised on evidence that defendants had in fact transacted business in Illinois. Monster Energy, 136 F.Supp. 3d at 902. State of Illinois v. Hemi Group LLC, 622 F.3d 754 (7th Cir. 2010). "In this case, however, Plaintiffs have not made such a showing. They provided no facts to show that any of the defendants named in the complaint aimed any action at Illinois."

The Internet is not borderless; Elvis is not everywhere.

American Bridal & Prom Industry v a bunch of defendants, NDILL June 29, 2016

No Cybersquatting Liability where Defendant Set up Gripe Website to Criticize Plaintiff #ACPA

JALIN REALTY CAPITAL ADVISORS, LLC v. A BETTER WIRELESS, NISP, LLC, Dist. Court, Minnesota 2013

FACTS:  Defendant "sought a loan from [Plaintiff] and the parties entered into an agreement under which [Plaintiff] would attempt to fund the loan in exchange for a $37,500 commitment fee. After [Plaintiff] did not fund the loan and did not refund the commitment fee, [Defendant] created a website with the domain name "jrca.info" and used the website to warn other consumers about what it perceived to be [Plaintiff]'s fraudulent business practices." 

Plaintiff Sued Defendant for a violation of the AntiCybersquatter Consumer Protect Act and other claims.  Defendant moves for Summary Judgment.

RULE:  "To prevail on a cybersquatting claim, [Plaintiff] must establish three elements: (1) that [Plaintiff]'s mark is distinctive or famous; (2) that [Defendant]'s domain name is identical or confusingly similar to [Plaintiff]'s mark; and (3) that [Defendant] used, registered, or trafficked in the domain name with a bad faith intent to profit from the sale of the domain name."

ANALYSIS:  Defendant's website is a "gripe site," not actionable under the ACPA. Defendant "alleges that it registered the domain name "jrca.info" and maintained the website in a legitimate, good faith attempt to warn other consumers about what it believed were [Plaintiff]'s fraudulent business practices...[Plaintiff] offers no evidence suggesting that [Defendant] intended to profit by creating the website. [Plaintiff] does not allege that [Defendant] offered to sell the domain name to [Plaintiff] or anyone else, nor does [Plaintiff] allege that [Defendant] offered to take down the website in exchange for money. "

The Wayward #ACPA Part 12: Which Factors Favors Which Party the Most

In these series of blog posts, we have been reviewing 11 years of AntiCybersquatting Consumer Protection Act cases, and the 9 factors which make up the bad faith analysis.  As we have seen, the 9 factors are grouped in two groups:  the Good Faith or Mitigating Factors (most like trademark) and the Bad Faith or Aggravating Factors (deal with the DNS stuff). 

In this post, we ask a simple question: which factor favors which party the most.  The results were surprising. 

• The factors that most favored DNOs were the Bad Faith Factors. 
• The factor that favored DNOs the most was Factor 7: Misleading Information, which went in favor of DNOs 68% of the time. 
• The other factor that favored DNOs the majority of the time was Factor 6: Offer to Sell, favoring DNOs 55% of the time. 
• Factor 8, Multiple Domain Name Registrations, favored DNOs only 40% of the time, even though the median number of domain names at issue is two (read that over a few times to get an idea of why the ACPA has gone astray).

Recall that in general, 64% of cases went in favor of TMOs. That 64% average can be used as a baseline.  

• All of the Good Faith Factors went in favor of TMOs more than 64% of the time. 
• None of the Bad Faith Factors went in favor of TMOs more than 64% of the time (Factor 5: Intent to Divert is on the 66%-line).

For the Good Faith Factors, the spread of the factor that went in favor of TMOs the most and the one that went in their favor the least was 14 percentage points; a relatively constrained spread. For the Bad Faith Factors, the spread was 60 percentage points. There is a greater dynamic with the Bad Faith Factors than for the Good Faith Factors.

One factor looks out of place. Factor 9, Famous Trademark, looks more like a Good Faith Factor than a Bad Faith Factor. The Good Faith Factors are traditional trademark law considerations (fair use, prior use, famous); the Bad Faith Factors are all unique to the Internet (diverting domain names, false information in domain name registration). Factor 9 looks more like the Good Faith (Trademark) factors and in fact is scored more like the Good Faith Factors. If we move Factor 9 over to the Good Faith Factors, the spread of percentage points for the Good Faith Factors changes from 14 to 16 points (a marginal change), where this move changes the spread of the Bad Faith Factors from 60 points to 34 points (a 26 point change).

Chart above compares number of cases factors was scored in favor of TMO as opposed to in favor of DNO; "neutral" scores were ignored.

Next: Which Set of Factors are Most Important?

The Wayward ACPA Part 11: “The Courts Do Not Apply a Mechanistic Scorecard”

Looking over 11 years of AntiCybersquatting Consumer Protection Act (ACPA) caselaw, I can now test how the courts have wandered astray with their decisions. In my last post, I once again hypothesized about the error of the courts ways --- in a way that turned out to not be so true.

But this time, this time is different. The reason this time is different is because it aint my conspiracy theory; it’s the courts.

As we went over a few posts ago, the courts must go over 9 factors to determine if the Domain Name Owner (DNO) has bad faith. Courts protest the notion that they go through a rote process, churning through the factors, awarding points to the parties, and then tallying up the scores. They claim that they are following Congress' directive to engage in a thoughtful consideration of the unique factors of individual cases, and that the 9 factors are just guidance.

But they’re lying.

In every case the courts allotted points for each individual factor and the party with the most points wins. Well, okay, there were two cases where the party with the highest score lost; both were cyber-griping cases where the actions of the DNO fell under the Safe Harbor Provision's fair use element. And there was one other case where the prevailing party had a tie score with the, um, devailing??? party. 

In the 67 other cases (or in 96% of cases), if you had the high score, you won. Simply math. So much for the “it’s not a scorecard” theory.

Next: Some Curious Results

PS: Speaking of scorecards.... Baseball starts in 2 days!  AH, Spring! 

The Wayward ACPA Part 10: “More Reasoned Decisions Mean Domain Name Owner Wins”

Looking over 11 years of AntiCybersquatting Consumer Protection Act (ACPA) caselaw, I can now test how the courts have wandered astray. Last post, I tested my conspiracy theory that the court’s analysis was all about trademark, and they ignored the unique characteristics of the Internet. That proved not to be so true. 

This time, my conspiracy theory is that in order to favor trademark owners (TMO), courts pick and choose which factors to consider. When the court’s arbitrarily focus on a few select factors, then, according to my theory, you know its going in favor of the TMO; a more reasoned approach that considers all the factors of the case would certainly go in favor of the Domain Name Owner (DNO).

And…… no. Not true.

In fact the exact opposite is true. The more factors considered, the more likely the TMO prevails. When the court considered five or fewer factors, the DNO won 50% of the time. When the court considered six or more factors, the DNO won only 21% of the time. The most number of cases broken out by number of factors considered was 19 cases resolved using 9 factors, where DNOs won only 21% of the time. TMO's highest winning percentage was 100% when 7 factors were considered; DNO's highest winning percentage was 100% when 0 or 1 factors were considered. 

Next: A Conspiracy Theory I Actually Get Right

ACPA Part 8: Sixty Seven Cases

These posts review the first 11 years of AntiCybersquatting Consumer Protective Act (ACPA) dispositive federal caselaw. Decisions were found by searching Google Scholar for the term "cybersquatting," reviewing cases cited by uncovered cases and literature, and tracking new cases through the use of Google Scholar Alerts using the terms "cybersquatting" and "15 U.S.C. § 1125(d)."

Preliminary Results

Some preliminary results:

• Total number of cases reviewed: 67 
• Percentage of cases where Trademark Owner (TMO) prevailed: 66%
• Percentage of cases where Domain Name Owner (DNO) prevailed: 34%
• Total factors considered all cases: 364
• Average number of factors considered in a case: 5.4
• Total factors in favor of DNO: 93 (26%) 
• Total factors in favor of TMO: 261 (72%)
• The number of cases that considered 9 or more factors: 22
• Fewest factors considered in a TMO winning case: 1

When the ACPA was first enacting, there was a flurry of cases. Then, for the next eight years, generally the number of ACPA cases hovered at small numbers. The year 2010 saw a spike in cases, but 2011 (8 months into the year) does not appear to be sustaining that spike.

 

DNOs have won on average 34% of the cases. In the initial year of litigation, TMO won all of the cases. Over time DNOs have fared progressively better, winning the majority of cases two out of the last three full calendar years. 

 Next: Failed Conspiracies

ACPA Part 7: Safe Harbor (no mere tiffs allowed)

At the end of the AntiCybersquatting Consumer Protection Act nine factors is the Safe Harbor Provision, which acts as a failsafe and reiterates Congressional intent:

Bad faith intent described under subparagraph (A) shall not be found in any case in which the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.

15 U.S.C. § 1125(d)(1)(B)(ii). See also 15 U.S.C. § 1125(d)(1)(B)(i)(IV) (fair use).

This is designed as a bright line test. Unlike the nine factors, this consideration is not discretionary. This is not a factor placed down as guidance; Congress clearly states that bad faith shall not be found in cases where it is believed that the use is legal or fair use. For example, the safe harbor protects uses such as parody and commentary and use by persons ignorant of another’s superior right to the mark. Mattel, Inc. v. Barbie-Club. com, 310 F. 3d 293, 906-07 (2nd Cir 2002); 15 U.S.C. § 1114 (innocent infringement by publishers); 15 U.S.C. § 1115 (innocent infringement as a defense to right to use a mark). Congress is making clear that Congress is specifically targeting nefarious cybersquatters with the ACPA; the ACPA is not to be extended to other mere tiffs.

Next: 67 Cases

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 Scorecard	TMO	DNO
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:	0	0

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
				Cybersquatting (required)		Aggravating Circumstances (optional)
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

ACPA Part 5: The Elements of a Cause of Action (Bad Bad Faith)

In order to succeed on an AntiCybersquatting Consumer Protection Act cause of action, a Trademark Owner (TMO) must establish:

• the TMO has a valid distinctive or famous trademark entitled to protection;
• the domain name and the trademark are either identical or confusingly similar (or dilutive for famous trademarks);
• the domain name owner used, registered, or trafficked in the domain name;
• with a bad faith intent to profit from the mark.

15 U.S.C. § 1125(d). See, e.g., DSPT Int'l, Inc. v. Nahum, 624 F3d 1213 (9th Cir. 2010); Bavaro Palace, S.A. v. Vacation Tours, Inc., 203 F. App'x. 252, 256 (11th Cir. 2006). 

Nine, Count Them, Nine Bad Faith Elements

The focus of this paper is the last element: bad faith.  There were a number of other trademark and domain name disputes that Congress was aware of at that time which included gripe sites, registration of multiple domain names not specifically associated with trademarks, the use of trademarks in metatags or on websites generally, and other quibbles.  Congress had the opportunity to create a nice neat law targeting relief for TMOs from nefarious cybersquatters, without touching upon other controversies.   The ACPA was designed to address the problem of cybersquatting, not other tiffs.

But Congress had to give the courts the means to distinguish the nefarious from the non-nefarious.  Thus, Congress handed down the Nine Bad Faith Factors. 

 (B) (i) In determining whether a person has a bad faith intent described under subparagraph (A), a court may consider factors such as, but not limited to—

(I)   the trademark or other intellectual property rights of the person, if any, in the domain name;
(II)  the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
(III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
(IV) the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
(V)  the person’s intent to divert consumers from the mark owner’s online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;
(VI) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct;
(VII) the person’s provision of material and misleading false contact information when applying for the registration of the domain name, the person’s intentional failure to maintain accurate contact information, or the person’s prior conduct indicating a pattern of such conduct;
(VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
(IX) the extent to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous within the meaning of subsection (c).

15 U.S.C. § 1125(d)(1)(B)(i).

There is no particular manner in which a court has to consider these factors, nor is a court limited to or required to follow these factors – they are merely guidelines. These factors are designed to balance the interests of TMOs with the legitimate interests of individuals on the Internet.32  In explaining how to proceed with a bad faith analysis, Congress stated

Each of these factors reflect indicators that, in practice, commonly suggest bad-faith intent or a lack thereof in cybersquatting cases. The Committee understands that the presence or absence of any of these factors may not be determinative. For example, while noncommercial uses of a mark, such as for comment, criticism, parody, news reporting, etc. * * *, are beyond the scope of the bill's prohibitions, the fact that a person uses the domain name at issue in connection with a site that makes a noncommercial or fair use of the mark does not necessarily mean that the domain name registrant lacked bad faith. To recognize such an exemption would eviscerate the protections of the bill by suggesting a blueprint for cybersquatters who would simply create criticism sites in order to immunize themselves from liability despite their bad-faith intentions. By the same token, the fact that a defendant provided erroneous information in applying for a domain name registration or registered multiple domain names that were identical to, confusingly similar to, or dilutive of distinctive marks does not necessarily show bad-faith. The Committee recognizes that such false information may be provided without a bad-faith intent to trade on the goodwill of another's mark, and that there are likely to be instances in which multiple domain name registrations are consistent with honest business practices. Similar caveats can be made for each of the eight balancing factors, which is why the list of factors is nonexclusive and nonexhaustive. Courts must ultimately weigh the facts of each case and make a determination based on those facts whether or not the defendant registered, trafficked in, or used the domain name with bad-faith intent to profit from the goodwill of the mark of another.

The AntiCybersquatting Consumer Protection Act, Report 106-140, 106th Cong., 1st Sess., p. 8 (Aug. 5, 1999).

The nine factors do not covered every unique fact pattern before the courts.  The Courts, therefore, have concluded that they may examine and consider the unique factors of each case. It is ultimately up to each individual court how it weighs these different factors.  "The role of the reviewing court is not simply to add factors and place them in particular categories, without making some sense of what motivates the conduct at issue. The factors are given to courts as a guide, not as a substitute for careful thinking about whether the conduct at issue is motivated by a bad faith intent to profit." Lucas Nursery & Landscaping, 359 F. 3d at 811 (6th Cir. 2004).

Next Up:  The Bad Faith Scorecard

ACPA Part 4: A Targeted Solution

Sen. Abraham

In response to the tales of horrors, Congress enacted the AntiCybersquatter Consumer Protection Act. According to the Legislative History,

"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 TMOs 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.’’"

The ACPA was not designed to address every little problem that might arise with domain names, but to address specifically "cybersquatters." In passing the ACPA, Sen. Spencer Abraham, sponsor of the ACPA, indicated that Congress was going after a particular type of activity that was "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."

The Ninth Circuit Federal Court of Appeals, in interpreting Congress' intent, identified the ACPA as a solution to the Wild West atmosphere of the 1990s Internet.

"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."

Reflecting on the narrowness of the ACPA's target, a federal district court in New Jersey stated, "The ACPA's congressional record consistently signals the drafters' intention to target a narrow class of cyber-squatters consisting of those who have the bad faith intent to profit, and not to tread on the rights of those with any other motives." A number of cases have refused to apply the ACPA in cases where the DNO "does not fit the 'classic' cybersquatter profile." 

As Prof. Michael Froomkin testified before Congress, "not every intellectual property violation on the Internet is cybersquatting." For that matter, not every online tiff between a TMO and a DNO amounts is cybersquatting. The ACPA was enacted, in the words of Congress, in response to cybersquatters, those "nefarious" individuals who were engaged in fraudulent practices of extorting DNOs, redirecting traffic to pornography or criminal sites, or defrauding customers into believing that they were interacting with the TMOs website.

Next Post :: The Cause of Action

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

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

The Wayward ACPA: Act I: The Land Grab

In 1994, WIRED magazine published Billions Registered by Joshua Quittner. The Internet, with roots going back more than 30 years, had at that time only recently emerged as a public phenomenon. The World Wide Web had been unleashed only three years prior. And most corporate executives would have laughed hysterically at the foretelling of the coming destruction of their business plans. 

For the ubber-geek, the Internet was cool, and corporate executives were clueless.  Internet culture was collaboration and consensus; corporate culture was the antithesis: greed and competition. The two cultures collided over domain names.

Quittner decided to see what would happen if he called up corporate culture and asked them about their Internet strategies. He wrote an article telling the tale of calling up McDonalds and Burger King. Neither company had a web presence at that time and both mcdonalds.com and burger_king.com were unregistered domain names. Neither company knew what he was talking about.  Neither company considered it a priority to return his calls. 

Quittner reported that at that time only one-third of Fortune 500 companies had registered domain names associated with their trademarks.  Fourteen percent of companies who had not themselves registered their trademarks as domain names, had those domain names registered by some stranger. Fifty percent of Fortune 500 companies had domain names associated with their trademarks unregistered and available to the first taker. With McDonalds and Burger King generally unresponsive, Quittner decided to go ahead and register mcdonalds.com.  He then concluded the WIRED article with the following:

So here's the deal: Let's get interactive. What should I do with mcdonalds.com? You tell me. I could auction it off. I could hold on to it as a trophy, a la Curry and mtv.com. I could set up a Mosaic home page, explaining the difference between McDonald's and Josh "Ronald" Quittner.

Quittner knew a storm was brewing on the horizon that would see a clash between corporate trademark holders and domain name owners. Within a few years, the Internet community was embroiled in the sound and fury of "the Domain Name Wars," an era of sound and fury that ultimately lead to the creation of ICANN. In the midst of the cacophony over domain names, Internet governance, intellectual property, and the First Amendment, there was rough consensus on one issue: cybersquatters bad! The Department of Commerce's 1998 White Paperon Internet governance identified cybersquatting as problematic. The Federal courts articulated perpetual disdain for cybersquatters – while struggling with curious new factual patterns that did not fit neatly under old law. And the 106^th Congress, an otherwise gridlocked Congress, found sufficient consensus in 1999 to pass the AntiCybersquatting Consumer Protection Act (ACPA). 

In passing the ACPA, Congress was responding to a particular problem: nefarious individuals who registered warehouses of domain names in order to extort ransom from Trademe Mark Owners (TMOs), or to unjustly benefit from familiar trademarks with confusing domain names that attracted and divert web traffic to fraudulent, criminal, or pornographic websites. But how would a Court distinguish between a nefarious fellow in a long trench coat, and a patriotic citizen engaged in First Amendment dialog over the quality of service in their community (a gripe site), or perhaps an enterprising entrepreneur who registers a creative domain name having the firm belief that the entrepreneur's flash of creativity did not conflict with previous trademarks?  In order to separate the wheat from the nefarious chaff, Congress identified nine bad faith factors for consideration (they're more like "guidelines"). 

In time, TMOs made good use of the ACPA, and Wild-West land-grab that was the 1990s came to a close.  Eventually, a few nefarious TMOs came to use the ACPA against Domain Name Owners (DNOs) that they, well, just didn’t like.  Unlike the early land-grabs, there was no multiple-domain names registered, no extortion, no falsified registrations, no redirections to pornographic sites – there was just a dispute between a TMO and a DNO. And, with the discretion given to them by Congress, some courts found violations in cases which "did not fit the profile of a cybersquatter." 

This is a story of trademarks, domain names, the ACPA, and the adjective "nefarious" which, in any given chapter, could be aptly applied to a different character in the story. The moral of this story is that the AntiCybersquatting Consumer Protection Act, as enacted by Congress, applied the adjective "nefarious" to "cybersquatters."  In cases where courts struggle to find "nefarious" activity on the part of the DNO, they should thwart the nefarious efforts of the TMO to use the ACPA in cases for which it was not designed.

Next Installment:  A Sour Story

The Nefarious ACPA: The Nefarious Methodology #cybersquatting #acpa #dns

Methodology is the boring icky stuff of research.  For a lawyer, methodology is normally simple.  You sit down with a big stack of dusty books and read what a bunch of old dusty judges said, based on their research of what some even older dusty judges said.

With this research I wanted to do a statistical analysis of court decisions.  That meant sorting out what cases were within scope and what were outside.  In order to find every ACPA dispositive federal case since enactment of the ACPA, I used Google Scholar.  I searched for all federal cases using the term "cybersquatting," reviewed all cases cited by cases uncovered from Google Scholar and discussed in literature, and tracked new cases using a Google Scholar Alert. While this may have missed some decisions, it reasonably uncovered ACPA federal decisions of a sufficient sample size.

I was looking for dispositive cases, in other words, cases where the judge made a ruling that resolved the case (not procedural orders on whether an attorney could have additional time for discovery).  "Dispositive cases" typically include trials, motions for summary judgment, motions to dismiss, and motions for preliminary injunctions where there is no further litigation on record.  Cases only get counted once; if there is a lower court decision and an appellate decision, that's just one case in the database. And I am specifically reviewing how courts have applied the bad faith factors of the ACPA cause of action.

Not counted were litigations resolved through default (where the defendant did not respond and did not appear in court; this is particularly, although not always, true of the in rem ACPA causes of action).  This actually turns out to be quite important later on in the analysis.

This methodology favors victorious plaintiffs. For a plaintiff to be successful, the plaintiff must successfully demonstrate every element of a cause of action.  In order to be successful on an ACPA cause of action, a plaintiff must demonstrate that the plaintiff has a valid trademark entitled to protection, that the trademark is distinctive or famous, that the domain name owner used, registered, or trafficked in the domain name, and bad faith.  In order for the defendant to be successful, the defendant need only knock out one of those elements.  For example, the defendant can be dripping in bad faith, but if plaintiff does not have a trademark entitled to protection, there is no successful claim.  Furthermore, courts generally consider whether there is in fact a trademark before they consider whether there is bad faith.  This means that a significant number of ACPA litigations were knocked out prior to the court conducting a bad faith analysis.  As this research only looks at litigations that were solved with a bad faith analysis, it does not count the litigations where defendants were successful on other ACPA grounds.

So what did I come up with?  Sixty-seven cases over 11 years.  As indicated yesterday, trademark owners won 66% of the time while domain name owners won 34% of the time.  The number of ACPA dispositive cases resolved per year has been inconsistent, with a dramatic increase in 2010. 

 

It's impressive to see how few cases there are each year.  When I was a judicial clerk, my judge was on a Civil II Fast Track docket.  I forget how many hundreds of cases were filed each year on our docket, and how many were pending at any given time.  The cases would go through discovery, mediation, and negotiations…. What was left went to trial.  And as I have frequently recounted to friends, what was left fell into two categories: (1) cases involving at least one incompetent attorney who simply could not do a proper analysis of the facts of his case and negotiate a settlement, or (2) a truly difficult or complex case where the resolution was anything but clear.  Those cases that went to trial frequently represented less than 5% of the litigations initially filed with the court.  I certainly expect something similar is happening here.  The cases that make it to a fully resolved court case tend to be the tip of the iceberg of the litigations initially filed in courts.