By David M. Nadler and Valerie M. Furman*
On June 21, 1999, at the close of Congress’ three-day high technology summit, Senator Spencer Abraham (R-MI) introduced the "Anticybersquatting Consumer Protection Act" (S.1255). The bill, which proposes amendments to various trademark infringement, dilution, and counterfeiting laws, is designed to protect consumers and promote electronic commerce. Senators Robert Torricelli (D-NJ), Orrin Hatch (R-UT) and John McCain (R-AZ) joined Senator Abraham as original co-sponsors of the legislation.
The term "cybersquatting" refers to the unauthorized registration or use of trademarks as Internet domain names or other identifiers of online locations. The legislation targets persons that in bad faith register popular trademark names, or names sufficiently similar to trademark names, as Internet domain names and sell them for exorbitant fees to companies that hold the trademarks for those names. One of the main goals of the legislation is to protect consumers, and more importantly children, who log-on to the Internet using the misleading web addresses registered by cybersquatters from being exposed to pornographic or other inappropriate material.
The legislation was prompted by Congress’ findings that cybersquatting (1) results in consumer fraud and public confusion with respect to the true source or sponsorship of products and services; (2) impairs electronic commerce, thereby impacting the U.S. economy; and (3) deprives owners of trademarks of substantial revenues and consumer goodwill.
The "Trademark Remedies" section of the legislation would expand the civil penalties in the Trademark Act of 1946 to afford plaintiffs the option — at any time before final judgment in a case involving the registration or use of an identifier and in lieu of seeking actual damages or profits — of recovering statutory damages violation of trademark rights of at least $1,000, but not more than $100,000 (or, in cases where a court finds that the registration or use of the trademark was willful, at least $3,000, but not more than $300,000) per trademark per identifier. The term "identifier," for purposes of the legislation, refers to an Internet domain name or other identifier of an online location that is either the plaintiff’s trademark, or is so sufficiently similar to the plaintiff's trademark as to be likely to cause confusion or mistake, deceive, or cause dilution of the distinctive quality of a famous trademark.
The remedies available to plaintiffs for violation of their trademark rights are also available for the willful dilution of famous marks or trade on the trademark owner’s reputation. In the case of a violation of trademark rights, willful dilution of famous marks, or trade on the trademark owner’s reputation, plaintiffs’ may also recover heir full costs and reasonable attorney’s fees related to the litigation.
The "Criminal Use of Counterfeit Trademarks" section of the legislation would add criminal penalties for the use of a counterfeit trademark on the Internet. The additional criminal penalties would make those that knowingly and fraudulently, or in bad faith, register or use the trademark of another guilty of a Class B misdemeanor carrying a prison term of greater than 30 days but fewer than 180 days; repeat offenders would be guilty of a Class E felony and subject to a prison term of greater than one year but fewer than five years.
To prevail on a claim of cybersquatting, a plaintiff must make a prima facie showing that a particular registration or use was fraudulent or in bad faith. Specifically, a plaintiff must provide evidence demonstrating that (1) the defendant registered or used an identifier intending to cause confusion or mistake, deceive, or cause dilution of the distinctive quality of a famous trademark, or with the intention of diverting consumers from the trademark owner to the defendant; (2) the defendant provided false information in its application to register the identifier, or offered to transfer the identifier’s registration to the trademark owner or other person or entity for something of value; and (3) the identifier is not the defendant’s legal first name or surname, or the defendant had not used the identifier in legitimate commerce before the earlier of either the first use of the registered trademark or the effective date of its registration.
The legislation exempts Internet service providers ("ISPs") and domain name registrars from liability for monetary damages where, upon written notice from the trademark owner and in compliance with either a court order or the reasonable implementation of a policy prohibiting the unauthorized registration or use of another’s registered trademark, the ISP or domain name registrar removes an infringing identifier from domain name server service or from registration, or transfers it to the trademark owner. The limitation on an ISP’s or domain name registrar’s liability would apply without regard to any ultimate determination that the domain name or other identifier is or is not infringing or dilutive.
According to Senator Abraham, "the growth of the Internet has provided businesses and individuals with unprecedented access to a worldwide source of information, commerce, and community. Unfortunately, those bad actors seeking to cause harm to businesses and individuals have seen their opportunities increase as well. Anyone engaging in cybersquatting activity should be held accountable for their actions." Senator Abraham added that the legislation "will also protect consumers who make typographical errors or enter legitimate domain names and are instead directed to Internet sites containing pornography or other inappropriate material."
* David M. Nadler is a partner in the law firm of Dickstein Shapiro Morin & Oshinsky LLP in Washington, DC where he practices Technology Law. He may be contacted at NadlerD@dsmo.com. Ms. Furman is an associate with the firm.
This article was previously published on the E-Commerce Law Bulletin website.
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