A federal Appellate court has made a ruling on a lawsuit under the AntiCybersquatting Consumer Protection Act (ACPA), which I think is really important for all domainers.
At the heart of the case is the question does the ACPA bad faith requirement apply as of the date of the registration or is bad faith subject to being reviewed at subsequent dates such as the sale or transfer of the domain or by the renewal of the domain.
The Appellate Court held that bad faith under the ACPA is ONLY determined as of the registration date and renewal of a domain or even the transfer of a domain to another party does not start the clock all over again on bad faith.
This is of course at odds with many UDRP’s panels that look at renewal of a domain as another point to see if bad faith was present.
However this court goes even further to say that basically good title, that is the lack of bad faith at the time of registration can be transferred to another.
“”The primary question before us is whether the term “registration” applies only to the initial registration of the domain name, or whether it also applies to a re-registration of a currently registered domain name by a new registrant. We hold that such re-registration is not a “registration” within the meaning of § 1125(d)(1).”
In my opinion its a very important case, for all domain holders.
I urge all to read through the facts as laid out by the court and the short opinion of the court.
Here is the issue as laid out by the Court:
The Anticybersquatting Consumer Protection Act (“ACPA”) prohibits “cybersquatters” from registering internet domain names that are identical or confusingly similar to reg- istered service marks and trademarks. See 15 U.S.C. § 1125(d)(1).
The prohibition contained in § 1125(d)(1) applies when a domain name is identical or confusingly similar to a mark that is distinctive “at the time of registration of the domain name.” Id.
The primary question before us is whether the term “registration” applies only to the initial registration of the domain name, or whether it also applies to a re-registration of a currently registered domain name by a new registrant. We hold that such re-registration is not a “registration” within the meaning of § 1125(d)(1).
I. Background
Defendant Edward Hise registered the domain name gopets.com in his own name in March 1999. He developed a business plan for gopets.com as part of a marketing class in which he was then enrolled. According to the business plan, Hise and a cousin who was a veterinarian would develop the site into “a pet owner resource covering health, safety, nutri- tion, animal behavior, training, competition, abuse, pets and children, free advice from veterinarians, and the pet industry.”
Edward and his brother Joseph Hise own the corporation Digital Overture. Among other things, the Hises perform internet-related services for clients, including registering and maintaining domain names.
The Hises and Digital Overture (collectively, “the Hises”) have registered more than 1,300 domain names in the last decade.
Most appear to be plausible names for future internet sites rather than names of existing businesses. They frequently register similar domain names at the same time. For instance, they registered ehinges.com, ebenches.com, erivets.com, and esconces.com on the same day.
In 2004, Erik Bethke founded the company GoPets Ltd. in Korea. GoPets Ltd. created a game called GoPets featuring virtual pets that move between the computers of registered users.
GoPets Ltd. filed an application to register the service mark “GoPets” in the United States on September 30, 2004. The mark was duly registered in November 2006. The regis- tration shows that the first use of the term in commerce occurred on August 20, 2004.
Beginning in 2004, Bethke made several unsuccessful attempts to purchase the gopets.com domain name from the Hises.
In response to Bethke’s initial email inquiry about the domain name, Edward Hise wrote on September 1, 2004, that he had initially been “dedicated to building a business” at gopets.com, but because his other web businesses were thriv- ing, he was open to selling the domain name to a “serious buyer[ ].” He said he was holding an auction for the domain name and invited Bethke to submit a bid by September 15.
Bethke did not respond immediately. On October 11, he wrote to Edward Hise again, noting that Hise still owned the domain name—”so presumably you did not have any other serious offers.” Bethke offered to pay $750 for the domain name. The Hises did not respond.
In January 2005, Bethke again inquired about the domain name, this time through a friend. Edward Hise wrote back several months later, stating that he would not sell the domain name “for little or nothing” and that another group had offered to develop the site and share the profits. On May 16, 2005, Bethke wrote to Joseph Hise:
Last year in October I offered you $750 for the domain after declining to participate in your blind bidding system.
You also failed to answer our communications both in email as well as postal mail.
We are proceeding with the ICANN domain dispute claim . . . .
My very last offer is $100 — the exact same cost as going through ICA[N]N, and frankly that is gen- erous for I would far rather donate our money to ICA[N]N.
A year later, on May 23, 2006, GoPets Ltd. filed a complaint against Edward Hise with the World Intellectual Property Organization (“WIPO”), which administers ICANN’s Uni- form Dispute Resolution Policy.
On July 26, 2006, a WIPO arbitrator decided in favor of Edward Hise. The arbitrator found that the gopets.com domain name was confusingly similar to GoPets Ltd.’s ser- vice mark, and he “wishe[d]. . . to make it clear that [he was] unconvinced” that the Hises ever had serious plans to develop a website at gopets.com. Nevertheless, the arbitrator held that WIPO rules only compel the transfer of a disputed domain name if the name was initially registered in bad faith. Since Edward Hise had registered gopets.com five years before GoPets Ltd. was founded, gopets.com was not registered in bad faith.
On October 30, 2006, after the WIPO decision, Bethke offered to purchase gopets.com from the Hises for $5,000. After a telephone conversation, Bethke increased his offer to $40,000 on November 15.
On November 20, Bethke emailed again, stating that his company owned the domain name gopetslive.com, and that they were about to begin a marketing campaign. They preferred to use gopets.com in the campaign and were still willing to pay $40,000 for it, but they needed to commit to a particular domain name by December 11. After December 11, “we would still be interested in gopets.com, but it loses all real urgency.”
On December 12, Edward Hise sent Bethke an email, attaching a four-page letter. The email requested that Bethke forward the letter to GoPets Ltd.’s investors. The email stated that within forty-eight hours Hise would send the letter directly to the investors. The letter, signed by both Edward and Joseph Hise, presented what they called “Acquisition Considerations.” It warned the investors that if GoPets Ltd. used the gopetslive.com domain name instead of gopets.com, the result would be to “continue to confuse newly adopted gopetslive.com” users. The letter noted that Bethke had said that some users were already confused. The letter stated, fur- ther, that if GoPets Ltd. bought gopets.com, “search engine results would be dramatically improved.” But “[i]f GoPets.com were developed further, gopetslive.com may face competitive Meta Tagging.” Metatagging is inserting words into the code of a web page that help determine how it appears in search results. By mentioning “competitive Meta Tagging,” the Hises were threatening to add metatags to the code of gopets.com, so that users who wanted to access the GoPets Ltd. game found at gopetslive.com would be directed to gopets.com instead.
The Hises ended the letter by offering to sell gopets.com to GoPets Ltd. for $5 million.
Two days after sending the email and letter, Edward Hise transferred the registration of gopets.com from himself to the brothers’ corporation, Digital Overture.
While these exchanges between the Hises and GoPets Ltd. were taking place, the Hises added content to gopets.com. According to records from the Internet Archive, a non-profit organization that archives websites, content first appeared on gopets.com on September 26, 2004, approximately a month after Bethke’s first inquiry about the site. Initially, the content consisted solely of a picture and description of a lost dog. The record does not reflect whether the website was updated at all during the next two years. By November 24, 2006, the site was updated with information about guide dogs.
On January 6, 2007, the site contained a link to the GoPets.com WIPO arbitration decision. On March 16, 2007, the site contained a “GoPets.com” logo and text saying “Welcome to goPets.com the official online website. goAhead [sic] pet lovers tell your friends that GoPets.com will be arriving soon!”
Soon after the WIPO decision in their favor, the Hises began registering domain names (“Additional Domains”) sim- ilar to gopets.com. On November 12, 2006, Edward Hise reg- istered gopet.mobi, gopets.mobi, and gopets.name.
On November 15, he registered gopetssite.com and going- pets.com. Between November 20 and the end of December, he registered gopet.biz, gopet.org, egopets.com, gopets.bz, gopets.ws, gopet.tv, gopet.ws, gopet.bz, gopet.de, gopet.eu, and gopet.name. He registered two additional domain name mygopets.com and igopets.com, several months later.
In March 2007, a few months after the Hises offered to sell gopets.com for $5 million, GoPets Ltd. filed a complaint against the Hises in federal district court for the Central District of California.
The complaint alleged cybersquatting under ACPA, service mark infringement and unfair competi- tion under the Lanham Act and California law, service mark dilution under the Lanham Act and California law, and false advertising under California law. The complaint was amended to add similar claims with respect to the Additional Domains after GoPets Ltd. learned of their existence during discovery. GoPets Ltd. sought injunctive relief, transfer of all the domain names, statutory damages, accounting for wrongful profits, actual damages, and attorney’s fees.
On May 27, 2008, the district court granted GoPets Ltd.’s motion for summary judgment on its ACPA and Lanham Act claims. GoPets Ltd. abandoned its state-law claims. The summary judgment order therefore disposed of all the claims in the case. The court granted attorney’s fees to GoPets Ltd. The Hises timely appealed.
Decision:
We begin with the text of the statute. ACPA provides that:
(A) A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person;
(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and
(ii) registers, traffics in, or uses a domain name that—
(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark . . .
To prevail on its ACPA claim, GoPets Ltd. must show (1) registration of a domain name, (2) that was “identical or confusingly similar to” a mark that was distinctive at the time of registration, and (3) “bad faith intent” at the time of registration. See 15 U.S.C. § 1125(d)(1). At issue in this case is what counts as “registration.”
We first discuss the registration and re-registration of gopets.com. We then discuss the registration of the Additional Domains.
Gopets.com
GoPets Ltd. concedes that the gopets.com domain name was not “identical or confusingly similar to” a protected mark when Edward Hise registered it in 1999.
GoPets Ltd. contends, however, that the term “registration” in ACPA includes re-registrations as well as initial registrations.
It contends that the re-registration of the domain name by Digital Overture in December 2006, after Edward Hise transferred it, was a “registration” within the meaning of § 1125(d)(1). Since the service mark GoPets was distinctive in 2006, GoPets Ltd. argues that the 2006 re-registration violated ACPA.
The district court agreed with GoPets Ltd.’s argument that a re-registration is a “registration” within the meaning of § 1125(d)(1). For the rea- sons that follow, we disagree with the district court.
We have previously explained:
There are three primary actors in the domain name system. First, companies called “registries” operate a database (or “registry”) for all domain names within the scope of their authority [e.g., all .com, .net, .gov, etc. domain names].
Second, companies called “registrars” register domain names with regis- tries on behalf of those who own the names. Registrars maintain an ownership record for each domain name they have registered with a registry.
Action by a registrar is needed to transfer ownership of a domain name from one registrant to another.
Third, individuals and companies called “registrants” own the domain names. Registrants interact with the registrars, who in turn interact with the registries.
When an individual registrant registers a domain name, she pays the registrar a fee and gives the registrar a registrant name, along with contact, billing, and technical information.
The words “registration” and “register” are not defined in ACPA. It is obvious that, under any reasonable definition, the initial contract with the registrar constitutes a “registration” under ACPA. It is less obvious which later actions, if any, are also “registrations.”
After registering, a registrant can take a variety of actions that modify the registration.
For instance, the registrant can update the registration if her contact or billing information changes. She can switch to “private” registration, where a third party’s name is substituted for hers in the public databases of domain registrants. She can switch between registrars, but leave her contact and billing information unchanged. A registrant can change the name of the registrant without changing who pays for the domain, or a registrant can transfer both the domain and payment responsibilities to someone else. Even if the registrant does none of these things, she must still renew the registration periodically. All of these actions could conceivably be described as “regis- trations” within the meaning of § 1125(d)(1).
Only one other circuit has addressed the question of re- registrations under ACPA. In Schmidheiny v. Weber, 319 F.3d 581 (3d Cir. 2003), Steven Weber registered the domain nameschmidheiny.com in February 1999. Stephan Schmidheiny is one of the wealthiest men in the world. ACPA became law in November 1999. In June 2000, Weber transferred ownership of the domain name to a corporation of which he was the president and treasurer. The corporation then re-registered the domain name with a different registrar. In November 2000, Weber offered to sell the domain name, now owned by the corporation, to Stephan Schmidheiny. Id. at 581-82.
At issue in Schmidheiny was a registration under 15 U.S.C. § 8131(1)(A) (then § 1129(1)(A)). Section 8131(1)(A) prohibits registration of domain names that are the names of, or that are “substantially and confusingly similar” to the names of, living persons. Like § 1125(d)(1), § 8131(1)(A) refers to “registration” without defining the term. The district court had held that re-registering the domain name to the corporation was not a registration within the meaning of § 8131(1)(A). Id. at 582. The Third Circuit disagreed, holding “that the word ‘registration’ includes a new contract at a different registrar and to a different registrant.” Id. at 583.
The Third Circuit assumed that Weber’s initial registration of schmidheiny.com was not covered by § 8131(1)(A) because it had been made before the passage of ACPA. See id. at 581-82. Based on that assumption, the Third Circuit was concerned that holding that re-registration was not “registration” within the meaning of ACPA would “permit the domain names of living persons to be sold and purchased without the living persons’ consent, ad infinitum, so long as the name was first registered before the effective date of the Act.” Id. However, we believe that the Third Circuit erred in assuming that Weber’s initial registration was not covered by ACPA. We agree with the holding of the Second Circuit in Sporty’s Farm that § 1125(d)(1)—and, by extension, § 8131(1)(A)—apply to registrations made before the passage of ACPA. See Sporty’s Farm, 202 F.3d at 496-97. If Weber’s initial registration vio- lated § 8131(1)(A), as we would hold it did, the Third Circuit’s concern evaporates.
Like the text of § 8131(1)(A), the text of § 1125(d)(1) considered in isolation does not answer the question whether “registration” includes re-registration.
Looking at ACPA in light of traditional property law, however, we conclude that Congress meant “registration” to refer only to the initial registration.
It is undisputed that Edward Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name.
We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner.
The general rule is that a property owner may sell all of the rights he holds in property. GoPets Ltd.’s proposed rule would make rights to many domain names effectively inalienable, whether the alienation is by gift, inheritance, sale, or other form of transfer. Nothing in the text or structure of the statute indicates that Congress intended that rights in domain names should be inalienable.
We therefore hold that Digital Overture’s re- registration of gopets.com was not a registration within the meaning of § 1125(d)(1). Because Edward Hise registered gopets.com in 1999, long before GoPets Ltd. registered its service mark, Digital Overture’s re-registration and continued ownership of gopets.com does not violate § 1125(d)(1).””
That’s a sound decision.
I don’t understand – don’t many UDRP rulings look at current use of the domain more than anything else when taking bad faith into consideration? Does this ruling now make that no longer applicable?
Steve
some panels look at the language to mean something else.
Hell this case has been in court for years and years.
UDRP panel can take the case into consideration but I don’t believe they have to follow it.
Maybe one of my legal eagle readers can weight in here
haven’t read this yet but this was imo a question that needed to answered.
dates are crucial. in general, acpa only applies if a registered mark exists when the domain is registered.
domain names, which are really “rented” more than they are “owned” (kinda like… a phone number) by their nature pass from party to party over time.
and we’ve seen that some mark owners like to try to use udrp or acpa against domain names that were registered before any confusingly similar mark was registered.
one case that springs to mind was flicker.com
that domain name was registered long before any flickr trademark.
and correct me if i’m mistaken… later, after flickr became a high traffic domain, flicker.com appeared for sale (transfer) on ebay. some might look at that and call it “bad faith”. others might not.
yahoo owned flickr, they started legal proceedings and in their complaint they included an acpa claim. but they ended up settling and just paying for flicker.com
make of that what you will.
So does this mean that an aftermarket sale to an unrelated party does not reset the “clock”?
Does the same apply to an expiring domain that is auctioned that does not fully delete at the registry?
GoPets.com existed way before GoPets Ltd. Does that mean that years from now, if someone wants a domain they can just set a stage to try to take the property owned by another years earlier?
Thanks for highlighting this decision.
It will be interesting to watch several particular panelists in future UDRPs. Hopefully this decision will help curb some 0f their more tortuous reasoning, not to mention the the self
referential citing of a certain panelist.
UDRP Panelists can decide on whatever basis they like, and have no obligation to follow any national law.
The exception to that, of course, is that UDRP panelists will accept any trademark claim of the complainant under any national law whatsoever. But when it comes to “rights” of the reapondent, forget it.
This case was also decided on the ACPA only. In a federal lawsuit, an ACPA claim can be joined with other trademark infringement claims, in which current use will matter, regardless of priority in registration.
This is a useful result, and conflicts with the Third Circuit (PA, NJ, DE and USVI).
“I don’t understand – don’t many UDRP rulings look at current use of the domain more than anything else when taking bad faith into consideration? Does this ruling now make that no longer applicable?”
A couple of things to bear in mind here.
The domain registrant WON the underlying UDRP case:
http://www.wipo.int/amc/en/domains/decisions/html/2006/d2006-0636.html
“6.8 The Respondent registered the Disputed Domain on March 22, 1999. There is no evidence before the Panel that the Respondent was aware of the Complainant at the time the registration took place. The Complainant’s business does not appear to have commenced until August 2005, and although there was correspondence between the Complainant and the Respondent in 2004, there is no evidence before the Panel that the Respondent was aware of the Complainant or its business plans any earlier than this date.
6.9 Since there is no evidence that the Respondent was aware of the Complainant or its business in 1999 the allegation of bad faith registration inevitably fails. In the circumstances, the Complainant has failed to prove paragraph 4(a)(iii) of the Policy.”
After that UDRP, the respondent registered additional domains.
The complainant filed suit alleging violation of the ACPA, and alleging other violations of the Lanham Act (the US trademark statutes).
This decision is directed solely to the ACPA violation, and whether renewal of the original domain name was a “re-registration”. On that point, the court essentially agreed with the UDRP outcome.
However, as I mentioned above, in the context of a trademark lawsuit, there are more claims than just cybersquatting.
Notice what the court finds:
“We reverse the district court’s holding that re-registration
of gopets.com by Digital Overtures violated § 1125(d)(1). We
affirm its holding that the Hises acted in bad faith, in violation
of § 1125(d)(1), by registering the Additional Domains, and
we affirm the award of $1,000 for each of those registrations.
We affirm the district court’s conclusion that the Hises’ use
of gopets.com violated the Lanham Act, and we remand for
determination of any relief the district court might find appropriate
for that violation.”
What this says is:
1. Renewal of the original domain name did not count as a “new” registration, and the ACPA requires the mark to be distinctive at the time of the domain registration.
2. Registration of the additional domain names later on, was cybersquatting.
3. The part of the trial court decision finding trademark infringement, apart from cybersquatting, is upheld.
Congrats to Steve Sturgeon!
“At the heart of the case is the question does the ACPA bad faith requirement apply as of the date of the registration or is bad faith subject to being reviewed at subsequent dates such as the sale or transfer of the domain or by the renewal of the domain.
The Appellate Court held that bad faith under the ACPA is ONLY determined as of the registration date and renewal of a domain or even the transfer of a domain to another party does not start the clock all over again on bad faith.”
I think you need to be careful. The Court did not say that courts in an ACPA case should only look at whether there was bad faith intent on the date of the registration. This case was all about what qualifies as a “registration,” and which definition of registration should be used for determining whether a registrant’s acts violate the Act.
The case stands solely for the proposition that — in the 9th Circuit — “registration” means the date on which a domain name is first registered. The registrant can pass on its rights, based on the original registration date, to purchasers, or transferees, who receive the benefit of the original registration date in an analysis whether their registration of the domain name violates the ACPA. In other words, if, as in this case, the domain name was registered before the trademark was ever used, the original registrant could not have violated the Act, since there was no distinctive trademark at the time of registration. A purchaser of the domain name would also enjoy the benefit of owning the domain name with a priority date pre-dating the trademark’s use. There is no bad faith because the original priority date continues.
Contrast this decision with a case (check out the Newport News decision) where a party registers a domain name, which is similar to a distinctive trademark at the time of registration, but is a dictionary word. The initial use is in good faith, but later changes. In those cases, the registrant can still be found to have violated the ACPA, even though the initial intent at the time of registration may not have been to profit off of a trademark in bad faith.
Brett
MHB –
Read this mate
http://www.theregister.co.uk/2011/09/23/gaga_poker_faceoff/
The US National Arbitration Forum is the place to fight any claim it would seem!
MHB —
thank you for sharing this very important ruling
On another legal note, perhaps, at some point, you could kindly address Fraudulent Conveyance.
Example:
If a party(a debitor) transfers several domains to a friend (the transferee) in order to avoid creditors.
Will creditors then pursue these domain assets, and prosecute the friend(the transferee)?
If yes, what are the penalties?
Thank you.
Paul
So let’s say the owner of ladygaga.org starts selling chocolate via the website.
What can Lady Gaga’s lawyers do?
Or let’s say the owner sell the domain name to a cybersquatter in China via an anonymous auction?
What then?
Lady Gaga’s US trademark claims do not cover everything under the sun in every jurisdiction.
And the org domain registration dates back to 2008.
For many of the trademark claims, the date of first use is 2009.
“The US National Arbitration Forum is the place to fight any claim it would seem!”
The dispute resolution provider is immaterial in that case, as the panelist takes cases from WIPO and NAF.
This is decision that domainers have been waiting for. This decision is critical to the secondary market. Without it, we would have all been limited as to what to do with our assets. Thank you, Hises and the 9th Circuit.
So the ACPA says one who “traffics in” domain names can be liable. Why have we not seen the owners of the aftermarket auctions being sued?
Though the majority are generic names, they are indeed also trafficking in domain names that are confusingly similar to distinctive marks.
Have a look at the sales lists in this website.
Is it not reasonable to infer they are doing this with an intent to profit from the goodwill of those marks?