United States: The Anti-Cybersquatting Consumer Protection Act Primer

Sometimes obtaining the transfer of an infringing or diluting domain name is not a sufficient remedy for a trademark owner. In some instances, rather than seeking redress using the Uniform Domain Name Dispute Resolution Policy ("UDRP") adopted in October 1999 by the Internet Corporation for Assigned Names and Numbers ("ICANN"), a trademark owner may consider filing suit under the Anti-Cybersquatting Consumer Protection Act ("ACPA"), enacted in November 1999.

Prior to the enactment of the ACPA, a gaping hole existed in the law. During the initial "gold rush" of the Internet, some individuals registered numerous domain names (or URLs – uniform resource locators) that copied famous trademarks. Some did this with the intent of holding them hostage to the rightful owners of the trademark, others with the intent to misuse them so as to confuse or deceive consumers. For example, the owners of the registered domain names, attphonecard.com and attcallingcard.com, who were completely unaffiliated with AT&T, set up web sites eliciting credit card information from unwitting consumers seeking to purchase calling cards. While deceitful uses could be attacked, if the URL was not being used at all, or if the use was for some ostensibly different product or service, the trademark owner seemed ill-equipped to prevent the hold-up.

Some trademark owners paid ransoms to acquire the domain names incorporating their trademarks, feeling it was often more cost effective to simply "pay off" a cybersquatter rather than pursue a costly litigation with little hope of anything more than an injunction against the offender. Others fought back using the limited and untested trademark laws in effect at the time. See Intermatic Inc. v. Toeppen, 947 F. Supp. 1227 (N.D. Ill. 1996); Panavision International v. Toeppen, 141 F.3d 1316 (9^th Cir. 1998).

The activities of these "cybersquatters" were seen as a serious threat to American consumers, businesses and the future of electronic commerce, and the ACPA came into being as a means to thwart this threat. Designed to scale back the misuse of trademarks as domain names, the ACPA does not cover acts such as linking to an offending domain, or "metatagging" and services such as "Real Names" and "Internet Keywords."

Under the ACPA, trafficking is broadly defined as including "sales, purchases, loans, pledges, licenses, exchanges of currency, and any other transfer for consideration or receipt in exchange for consideration." 35 U.S.C. § 1125(d)(1)(E). Thus, it appears that anyone in possession of a domain name, no matter how acquired, is potentially subject to the ACPA.

Further, unlike previous dispute resolution policies which required absolute identity between the registered domain name and the trademark in question, absolute identity is not required to proceed under the ACPA. Much as in traditional trademark actions, it is sufficient if the domain name is "confusingly similar" either to a trademark that is distinctive at the time the domain name is registered, or dilutive of a trademark that is famous at the time the domain name is registered. Contrary to traditional likelihood of confusion analysis, however, the goods or services of the respective parties are irrelevant to the analysis. All that must be shown is confusing similarity between the trademark and the registered domain name, and bad faith in the procurement, or use, of the registered domain name.

From recent decisions, it appears that the courts have applied the "confusing similarity" standard differently than the "likelihood of confusion" standard ordinarily employed in trademark actions. See Sporty’s Farm L.L.C. v. Sportsman’s Mkt., 202 F.3d 489 (2d Cir. 2000). However, prevention of consumer confusion is still at the heart of the inquiry. See Grennpoint Fin. Corp. v. Sperry & Hutchinson Co., 116 F. Supp. 2d 405 (S.D.N.Y. 2000); and Mattel, Inc. v. Internet Dimensions, Inc., 55 U.S.P.Q. 2d 1620 (S.D.N.Y. 2000) ("barbiesplaypen.com" was held to be confusingly similar to Mattel’s registered trademark BARBIE.)

In order to launch a successful challenge under the ACPA, it is of critical importance to be able to meet the bad faith element. While trademark rights apply even in the face of innocence, for the ACPA to apply, the defendant must have "a bad faith intent to profit from that mark...." or a personal name as may be applicable. 35 U.S.C. § 43(d)(1)(A)(i). See Harrods Ltd. v. Sixty Internet Domain Names, 110 F. Supp. 420 (E.D. Va. 2000) (dismissing in rem action for failure to plead bad faith). Further, the Act does not apply to a party who is aware of the trademark status of a mark, but registers the mark for a reason other than bad faith intent to profit, even if the domain name is likely to confuse consumers. However, traditional trademark infringement or dilution claims may still be available in this instance.

The Act also does not apply when two companies with independent and valid rights in the same mark seek the same domain name. For example, Delta Airlines could not use the ACPA to challenge the Delta Faucet Company's registration of delta.com. The "profit" from use of the domain name is from the legitimate use for the promotion and sale of goods or services as to which the registrant has a legitimate right, and not from extorting payment from the only legitimate owner of the mark.

Seeking redress under the ACPA is not an exclusive remedy. A trademark owner may simultaneously maintain other related civil causes of action in the same suit, including trademark infringement, unfair competition and misrepresentation claims under Sections 32 and 43(a) of the Lanham Act, a dilution claim under 43(c) of the Lanham Act, and any equivalent state and common law claims. In addition, there may be criminal ramifications for a cybersquatter who attempts to extort money from the rightful owner. Many states have consumer fraud and deceptive practices statutes that may apply. Also, while there are no reported cases, it would appear that a cybersquatter’s actions could constitute extortion and/or mail fraud under the appropriate factual circumstances.

A party seeking relief under the ACPA must be the owner of an identical or confusingly similar mark. Neither a federal nor state trademark registration is required under the Act; common law trademark rights are sufficient to seek remedies under the Act.

Personal jurisdiction can be obtained against persons who direct activities (such as an offer to sell a domain name) within a jurisdiction. For example, a call and e-mail to a plaintiff, by an agent of the registrant, with an offer to sell a domain name were sufficient activities to exercise personal jurisdiction. Nutrisystems.com, Inc. v. Easthaven, Ltd., 2000 U.S. Dist. LEXIS 17528 (E.D. Pa. Nov. 16, 2000); see also McRae’s, Inc. v. Hussain, 105 F. Supp. 2d 594 (S.D. Miss. 2000). As it has evolved, however, merely registering an allegedly infringing domain name with a registrar located within a district is not enough to establish personal jurisdiction. See America Online, Inc. v. Huang, 55 U.S.P.Q.2d 1560 (E.D. Va. 2000).

If personal jurisdiction can not be established over the domain name registrant, or the domain name registrant can not be found after diligent search, an action may be brought in rem against the domain name itself in the judicial district in which the domain name is registered or has been assigned. See, e.g., Heathmount A.E. Corp. v. Technodome.com, 106 F. Supp. 2d 860 (E.D. Va. 2000); Alitalia-Linee Aeree Italiane S.p.A. v. Casinoalitalia.com, 2001 U.S. Dist. LEXIS 534 (E.D. Va. Jan. 19, 2001); see also Lucent Techs. v. Lucentsucks.com, 95 F. Supp. 2d 528 (E.D. Va. 2000) (dismissing in rem action where identity and address of registrant was found and jurisdiction was possible); Banco Inverlat, S.A. v. www.interlat.com, 112 F. Supp. 2d 521 (E.D. Va. 2000).

In addition to injunctive relief, including a court order that the domain name registrant to cancel the registration, or transfer it to the plaintiff, a plaintiff may seek damages for violations of the Act, but only in the case of an ACPA action brought with personal jurisdiction. These damages include as measures the actual damages to the plaintiff, and the profits of the defendant. Moreover, as an alternative not available in an ordinary trademark action, the courts may order an award of statutory damages of "between $1000 and $100,000 per domain name, as the court considers just." The plaintiff must elect to receive statutory damages instead of actual damages and profits "at any time before final judgment is rendered by the trial court."

The few cases granting statutory damages under the ACPA have looked to factors similar to those under copyright laws. For example, in Electronics Boutique Holdings Corp. v. Zuccarini, 56 U.S.P.Q. 2d 1705 (E.D. Pa. 2000), the court found the defendant’s actions particularly egregious in that he was using ordinary misspellings to "mousetrap" users into being barraged with new browser windows containing advertisements, and had continued to register domain misspellings after being enjoined from doing so in other cases, and thus, awarded the maximum statutory damages of $100,000 per infringing domain name. See also, Shields Zuccarini, 2000 U.S. Dist. LEXIS 15223 (E.D. Pa. July 18, 2000) (the court awarded only $10,000 per infringing domain name ($50,000 total), apparently influenced by the fact that the infringing web sites were first registered before enactment of the ACPA).

If the award is based on actual damages to the plaintiff, those damages are subject, at the court’s discretion to increase (not to exceed trebling) or decrease depending on the circumstances of the case. If based on profits, and the court finds that such an award is "either inadequate or excessive" the court may again adjust the award up or down in its discretion.

Further, a prevailing plaintiff is entitled to costs of the litigation and, "in exceptional circumstances may award reasonable attorney fees to the prevailing party." Id. See, Electronics Boutique Holdings Corp. v. Zuccarini, supra; and Shields v. Zuccarini, supra.

Application of the Act is retroactive. The ACPA applies to domain names registered before November 29, 1999, the date of enactment. Injunctive remedies and damages are available for acts which continue after the date of enactment. See E & J Gallo Winery v. Spider Webs, Ltd., 2001 U.S. Dist. LEXIS 912 (S.D. Tex. Jan. 29, 2001); Shields v. Zuccarini, 2000 U.S. Dist. LEXIS 15223 (E.D. Pa. July 18, 2000). Even cases that were filed (or even decided) prior to enactment of the ACPA are eligible for injunctive relief. See Sporty’s Farm LLC v. Sportsman’s Market, Inc. Damage remedies are not available, however, with respect to acts of cyberpiracy which occurred before November 29, 1999.

With the enactment of the ACPA, trademark owners now have a powerful tool to challenge cybersquatters and protect their trademarks from future hostage situations.