UK: Squatters Rights in Cyberspace

How to Keep your Domain Name Clear of Limitations
Last Updated: 10 May 2002

So all is well at gold.e.locks.com, supplier of quality products to the health and beauty industry. Orders are flooding in and the brand strengthens by the day. All intellectual property rights are locally registered. Your investors approach you and urge you to ply your trade in the United States. All the necessary procedures are in place and you move to register your domain name gold.e.locks.us.com. You prepare your PR machine for a major launch.

Then you get a shock. The domain name you want has already been registered. Your enquiries reveal that a small company registered in Delaware has registered this as a domain name. Your investors tell you it is vital to have this domain name as consumer research has indicated that it would be more attractive to the US market. How can you resolve this dilemma?

The first step to take is a commercial one. Contact the Delaware company to see if they are prepared to transfer the domain name for a set fee, together with the incidental costs of transfer. You can then gauge whether the company has a business of substance and wishes to protect its rights, or whether it is simply an opportunist which is looking for fast compensation. This makes a considerable difference in the event of the proceedings being necessary.

THE ICANN POLICY for Dispute Resolution

Let us assume that Delaware company wants $500,000 to transfer the domain name, and this is not commercially acceptable. Your next step is to get in touch with the Internet Corporation for Assigned Names and Numbers ("ICANN"), which has adopted the uniform domain name dispute resolution policy ("the Policy") which sets the terms and conditions upon which a dispute over domain name registration can be resolved.

In line with the current trend towards settling disputes through alternative dispute resolution ("ADR"), the Policy provides for a mandatory administrative proceeding which will be conducted before a selection of administrative dispute resolution service providers ("the Providers"). These include, for example, the World Intellectual Property Organisation.

GROUNDS FOR A COMPLAINT

A complaint must be submitted to a Provider stating that:

  1. The US company’s domain name (gold.e.locks.us.com) is identical or confusingly similar to a trade mark or service mark in which you, a complainant, have rights;
  2. The US company has no rights or legitimate interests in respect of the domain name;
  3. The domain name has been registered and is being used in bad faith.

As Complainant, you must prove each of these three elements are present.

In respect of point 1, you have registered gold.e.locks.com as a trade mark in England and the US, and it has a strong brand name. This helps your cause considerably. In respect of point 2, there is evidence that a US company does carry out a small amount of trade through several salons, which raises an arguable point for the provider. However, on the basis of guidelines laid down in the policy, given the modest turnover of the US concern and the request for $500,000, this is likely to suggest a non-commercial or unfair use of the domain name with intent for commercial gain.

In respect of point 3, the Policy sets out a number of instances of evidence of the registration and use of a domain name in bad faith. In brief these are as follows:-

  • Circumstances indicating that the domain name was primarily acquired for the purpose of selling, renting or otherwise transferring the domain name registration to the complainant for valuable consideration in excess of the documented out of pocket costs directly related to the domain name;
  • The domain name is being registered to prevent the owner of the trade mark or service mark from reflecting the mark in a corresponding domain name;
  • The domain name has been registered primarily for the purpose of disrupting the business of the Complainant as a competitor;
  • The domain name has been used in an intentional attempt to attract, for commercial gain, internet users to the web site by creating a likelihood of confusion with the Complainant’s mark.

Timetable

The key point of the mandatory administrative proceeding is that it is quick and inexpensive. The timetable for resolution can be as short as two months. The procedure is as follows:

  • If the Provider is satisfied that the complaint has met its administrative compliance requirements, it will forward the complaint to the Respondent within 3 days of receipt from the Complainant of its fixed fees. The date on which the Provider forwards the complaint to the Respondent is known as the ‘Date of Commencement’.
  • The Respondent must provide its reply to the Provider within 20 days of the Date of Commencement. In exceptional circumstances the Provider may, at the request of the Respondent, extend the time for filing its reply.
  • Once the reply has been received by the Provider, the parties have a period of time in which to elect for the appointment of a panel. This process of appointment can lead to potential delays. After consideration of the merits, the panel will forward its decision to the Provider within 14 days of its appointment.
  • Within 3 days of receiving the decision from the panel, the Provider will communicate the full text of the decision to the parties. A date will then be set for the implementation of the decision. As a matter of interest, the Provider will usually publish the full text of the decision and the date of its implementation on a publicly accessible web site. In the event that it is decided that the complaint was brought in bad faith, the portion of the decision which determines such a finding will always be published.

As and when the Provider has made its decision, it will seek to enforce the decision itself and within a matter of days the transfer of the domain name (if so ordered) will take effect. The onus will be on the aggrieved party to take court proceedings, in that time period, to challenge the decision.

Proceedings through the courts as an alternative

Despite its title, the mandatory administrative proceeding shall not, however, prevent either party from submitting the dispute to a court of competent jurisdiction for independent resolution as an alternative procedure, or to agree to a different type of ADR. The policy has a mechanism for suspending any decision pending the outcome of proceedings in relation to the dispute.

Assuming that the parties simply comply with ICANN’s decision, gold.e.locks.com can learn its fate within a short time frame. If the proceedings are unsuccessful, then there is always a possibility of challenging this decision in the courts. It remains to be seen whether this will prove to be an effective medium for dispute resolution, but the early signs are encouraging.

Nominet, the registrar of .uk websites (e.g. .co.uk, .org.uk, .net.uk, .plc.uk), has recently amended its dispute resolution procedures. Nominet’s dispute resolution service does not replace the role of the courts, but it does offer an alternative procedure which can be quicker and cheaper than going to court. Nominet has the power to transfer registration of a domain name, to suspend a domain name’s use, or to cancel the registration of a domain name such that it becomes available again on a first come – first served basis.

Other concerns

But what if the facts were changed? Obviously, if the complainant came up against a major US concern with properly registered intellectual property rights, the situation may have been different. Indeed, even if gold.e.locks.com started to do business in the US, it could find itself on the receiving end of a complaint from the US concern. Each case must turn on its particular facts.

And what of the major US concern who wants to do business in the UK? Two recent cases have given useful guidance:

(1) MBNA America Bank NA and MBNA International Bank Limited v Stephen Freeman

MBNA is one of the world’s largest credit card issuers, and conducts e-commerce at www.mbna.com. The defendant registered the domain name www.mbna.co.uk for use with his business, which facilitates internet advertising, and which is described as ‘marketing banners for net advertising’ (or abbreviated to ‘MBNA’).

MBNA obviously incurred great expense in developing its reputation and recognition of its name, and the mark ‘MBNA’ is of great value and importance to it. It brought an interim action against Mr Freeman to prevent him from using the domain name www.mbna.co.uk, and to prevent him from selling or dealing with the domain name, on the basis that it infringed the claimants’ trademarks and amounted to passing off.

The court refused to order that the defendant should not use the domain name, as it believed that the defendant’s registration and use of the domain name was genuinely intended as descriptive of its services.

The court did however order that the defendant should not be permitted to sell or deal with the domain name prior to the main trial, as it acknowledged that the domain name could become an instrument of fraud if it was owned by someone without a reasonable explanation as to his or her registration and use of it.

(2) 1-800 FLOWERS Inc. v Phonenames Limited

The applicant is an American florist which uses as its name its US freephone number ‘1-800-FLOWERS.’ The defendant is the registered trademark owner of the UK freephone number ‘0800-FLOWERS’, which it uses by franchise in the UK.

The applicant had applied to the Registrar of Trademarks to register its name as a trademark in the UK. However, on appeal to the Court of Appeal it was confirmed that the name was not registerable, as it was not sufficiently capable of distinguishing the applicant’s services, and would be likely to lead to confusion.

Importantly, it was noted that the applicant’s use of its name on its internet site (www.1800flowers.com) was not sufficient to establish ‘use’ of the trademark in the UK. Buxton LJ said that the idea of ‘use’ in a certain area, such as the UK, requires "some active step in that area on the part of the user that goes beyond providing facilities that enable others to bring the mark into the area."

These two important cases show how important it is to protect your company name, trade name and trademarks in every jurisdiction you intend to trade in, or run the risk of someone else obtaining rights to that name and preventing you from using it yourself.

Registration of the .co.uk, .com, .net, .biz etc equivalents of your domain name, backed by usage, is relatively inexpensive when compared to the potential costs of negotiating the purchase of that name from another user (should they wish to sell), or of litigating to procure that result, with the inherent uncertainties that brings.

And what of so called "hate web sites"? This would involve similar circumstances to those set out in this example, but with the added pressure that the American site is being used to denigrate gold.e.locks.com’s products and put it out of business. What remedies are available apart from seeking a transfer of the domain name on the grounds of bad faith? That brings to light the complex area of defamation, and will need to be the subject of a separate lengthy discussion.

All names used are fictitious and any association with any person or entity is purely coincidental.

The information contained in this article is for general purposes only. It does not aim to provide comprehensive legal advice on any issue.

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