The Anti-Cybersquatting Consumer Protection Act: The Solution Or Just Getting In The Way?



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The last decade has seen an unprecedented growth in technology which has paved the way for globalization and given new meaning to the term “international commerce”.  The foundation of this technology boom is the internet and the World Wide Web.  The marvel that is the internet allows for instantaneous data transfer across a “highway” which can be accessed with little or no cost.[1] Few could have envisioned the possibilities that the internet provides in every aspect of life.  However, along with these positive aspects come potential pitfalls and unforeseen problems due to the novel nature of the internet.  This digital highway has recently become populated with “modern day highwaymen out for a fast buck.”[2] These rogues, known as “cybersquatters”, are individuals who register domain name addresses with the primary purpose of reselling them.[3] Therefore, trademark holders are forced to pay these cybersquatters a substantial amount of money in order to get back a domain name making use of their trademark.  When cybersquatting first reared its ugly head, the only ammunition that trademark holders had was traditional theories based on trademark law.[4] However, these proved to be insufficient in the wake of internet technology, thus necessitating the creation of new enforcement mechanisms.[5] Hence, the Uniform Domain Name Dispute Resolution Policy (UDRP) and the Anti-Cybersquatting Consumer Protection Act (ACPA) were enacted.[6]

The enactment of the ACPA on November 29, 1999 clearly indicated a Congressional intent to surpass the protection offered by the Federal Trademark Dilution Act (FTDA) and traditional infringement actions.[7] In enacting the ACPA, Congress was attempting to create a bright-line rule that would clearly resolve cybersquatting disputes.[8] However, all it has done is created uncertainty as to the majority of cases.  Granted, the Act is useful in cases involving obvious bad faith.  But where the circumstances surrounding bad faith are unclear, the Act is less helpful.[9] For example, in 1999 the New York Yankees sued an individual under the Act over the domain name newyorkyankees.com.[10] The defendant claimed that he intended to run a noncommercial fansite, even though he failed to develop such a site in two years.[11] Furthermore, the defendant claimed that he had never offered to sell the domain name to the Yankees.[12] On the other hand, the Yankees claimed that the defendant demanded $25,000 for the name.[13] This is a good example of a case where bad faith is not readily apparent due to the contradicting evidence.  In these types of cases, the result will hinge on which set of facts is the most believable (or provable).[14] Even if the defendant in the Yankees case could prove that he did not act in bad faith, the case would probably never reach the fact-finding stage if the wealthy and powerful plaintiff could sufficiently intimidate the defendant into turning over the domain name.  These situations, known as reverse cybersquatting, will be discussed in detail in the next section.

In determining bad faith, one of the more important factors in the Act is whether the defendant “offered 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.”[15] The difficulty comes in where the court has to determine whether the defendant intended to use the domain name.  It would be very difficult to say with any certainty that someone did not intend to use a name.  It is possible that a defendant registered a domain name with the intention of offering goods and services, but later decided that the business venture was not economically viable.  In this situation, it would make sense to sell the domain name if there were any takers.  However, it is also plausible that the defendant will not be able to sufficiently prove that he had plans to start a business.  The court might then infer bad faith in a situation where the defendant was nothing more than conscientious in promptly registering a domain name.

The Act is also unclear as to situations where new businesses decide to “warehouse” domain names for future use where these domains are identical or confusingly similar to the trademarks of an existing business.[16] Bad faith, according to the Act, can be inferred where a defendant intends to profit by knowingly acquiring multiple domain names when there is a likelihood of confusion with another’s trademark.[17] It would be very difficult to ascertain whether the defendant actually knew of the existence of the other trademark.  Also, the statute does not define what intent to profit means.[18] Nobody knows what the liability will be for a defendant “who registers a domain name but takes no further action to profit from it.”[19] Even if there is an intent to profit, it is not clear what the consequences would be if a company warehoused generic domain names and then resold them to interested parties.  For instance, suppose that someone registered names such as business.com and cars.com, with the intent of selling them at substantial prices.[20] Does this qualify as bad faith warehousing under the Act, entitling an entity engaged in these businesses to recover the domain name?  The answer is not clear.  A name such as business.com is sure to not directly infringe on a trademark, due to the generic nature of the name.  But a company that has a similar name may still claim that this is cybersquatting.  To allow them to prevail would be to give them a bigger advantage than they already have.  It is the large corporations who are in a better position to think of all possible domain names from the very beginning and register them accordingly.  There is something fundamentally unfair about punishing a savvy wholesaler who registers generic domain names in the hopes of reselling them to the public.  Unless a trademark is violated, the concept is the same as that of any wholesaler reselling a product to the public at a profit.  That being said, the ACPA’s attempt at a clear-cut law has failed due to the uncertain outcome in cases involving domain name warehousing.

Another deficiency in the ACPA is in addressing cases where there is a legitimate competing use.  That is, two legitimate users of non-related goods and services are competing for use of the same domain name.[21] In these types of cases, there can be no bad faith because each party feels as though they are entitled to the domain name.  Nevertheless, by using the ACPA the courts will attempt to “squeeze” the defendant into the shoe of a cybersquatter.  For instance, a recent case in Los Angeles involved a dispute  between eToys, a leading online toy retailer, and etoy.com, an art site.[22] Both companies had valid trademarks in their respective names and their businesses were completely unrelated.  It is no surprise that both companies wanted access to the same domain name.  To complicate matters even more, eToys registered its trademark in May 1997, which was before etoy.com registered theirs.[23] However, etoy.com claimed that it first used its name in 1994.[24] Furthermore, etoy.com claimed that they registered their domain name first.[25] The Court granted a preliminary injunction against etoy.com, but eToys abruptly dropped the suit shortly thereafter amidst email pressure from the public.[26] This was an interesting development in that it illustrated that the internet was a culture of its own.  Apparently, “eToys was bombarded with mail urging it to back off and try to coexist.”[27] Even the general public realized that it would be unfair to treat the less formidable etoy.com as a malicious cybersquatter.

An inherent problem with the ACPA is that it automatically assumes that one of the parties has to be the “bad guy.”  Even though the Act does allow for the defendant to show that he or she had trademark rights, this provision is under the “bad faith factors” list.[28] Therefore, it is possible that a defendant who has a valid trademark could still be found to be a bad faith infringer.  More specifically, because the court is free to consider many factors in determining bad faith, it could “overrule” the fact that the defendant has trademark rights.  Granted, it is not inconceivable that a trademark holder can act in bad faith.  However, more weight should be given to the fact that the two parties to a lawsuit have equal trademark rights.  This is so as to level the playing field because in most instances it is a David vs. Goliath battle between a corporation and a small business.  Regardless, it is easy to see how these types of disputes will be reduced to costly battles of proving up the elements of the ACPA.

A powerful plaintiff can use the ACPA to intimidate a defendant into giving up a domain name.  This predatory behavior, known as “reverse cybersquatting,” can be defined as “using the ACPA in a bad faith attempt to deprive a registered domain name holder of a domain name.”[29] The plaintiff is usually a large corporation and will threaten a registrant with civil penalties under the ACPA if he or she does not give up the domain name.  The problem in reverse cybersquatting cases is that the registrant usually has a perfectly legitimate domain name.[30] The corporation just figures that they can “bully” the individual into succumbing to the threats of large penalties.  It is easy to see how defendants in these cases could give up their domain names out of fear.  All the plaintiff has to do is send a threatening cease and desist letter that states the defendant could be liable for up to $100,000 in fines and attorney’s fees.[31] It is not difficult to imagine the effect that these tactics could have on free speech, as it will no doubt make it easier for large companies to hoard domain names, which in turn will prevent people from registering domain names that include references to corporations and their trademarks.[32]

As e-commerce continues to thrive, trademark holders will require greater protection against cybersquatters.[33] The internet is constantly evolving and the law must struggle to keep up with these changes[34].  However, in trying to keep up with this technology lawmakers must be careful not to overextend the protection they give to trademark holders. Overprotecting trademark holders will result in diminishing the rights of individual citizens by compromising fair use and free speech.  Furthermore, since trademark holders are the ones with more legal and financial resources, they are in a position to intimidate individuals who have a desirable domain name.  The Anticybersquatting Consumer Protection Act will only serve to exacerbate these concerns due to its unclear and overly broad language.  The Act is still in its infancy, and its effectiveness will be determined after years of court interpretation.[35]


[1] Removing A Hazard From The Internet Freeway – The 1999 Anticybersquatter Law, http://tenonline.org/art/ip1/0011.html.
[2] ibid.
[3] ibid.
[4] ibid.
[5] ibid.
[6] Cybersquatting:  What It Is and What Can Be Done About It, http://www.nolo.com.
[7] Heller (n 9).  The ACPA is actually an amendment to the already existing Lanham Act.  The Lanham Act “is a federal trademark law to provide for the registration of trademarks and to provide remedies for infringement of those marks, which requires proof that there is a likelihood of confusion between plaintiff and defendant’s marks.”  See also the Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d).
[8] Andrew G. McCormick and Laura N. Mankin, The Death of Cybersquatting? In the Shadows of Legislation, Dispute Lingers On, http://www.cio.com/archive/041500/fine.html.
[9] ibid.
[10] New York Yankees vs. McKiernan, 99 CV 8449 (S.D.N.Y. 1999).
[11] ibid.
[12] ibid.
[13] ibid.
[14] McCormick and Mankin (n 47).
[15] 15 U.S.C. 1125(d)(1)(B)(i)(VI).
[16] Hift (n 8).
[17] 15 U.S.C. 1125(d)(1).
[18] Marisa Gomez, Fighting Cybersquatters: Methods for Domain Name Dispute Resolution,
http://www.sidley.com/cyberlaw/features/cybersquatter.asp (2000).
[19] ibid.
[20] Marko Bonac and Barbara Pouse Golub, Warehousing of Domains, http://www.arnes.si/
[21] Heller (n 9).
[22] McCormick and Mankin (n 47).
[23] ibid.
[24] ibid.
[25] ibid.
[26] ibid.
[27] ibid.
[28] 15 U.S.C. 1125(d)(1)(B)(i)(I).
[29] Heller (n 9).
[30] Hift (n 8).
[31] ibid.
[32] Gwendolyn Mariano and Evan Hansen, Parody Sites Sucked Into Cybersquatting Squabbles,
http://www.news.com.com.
[33] Heller (n 9).
[34] See Dr. Ian Jay Kaufman, Domain Names, http://www.ladas.com/Internet/DomainNames/Domain01.html (The recent introduction of new top-level domain names (TLD’s) such as .biz, .info, .name, and .museum will only make the cybersquatting problem worse.  Companies will struggle to register as many domain names as they can so as to protect their trademark.  However, it will be difficult for them to cover all of their bases because each possible domain name would have to be registered multiple times for each of the existing TLD’s.  As a result, any “exposed” TLD could be a target for cybersquatters.)
[35] Serena C. Hunn, Anticybersquatting Consumer Protection Act: A Powerful Remedy in Domain Name Disputes, or a Threat to Electronic Commerce? http://www.fmew.com/archive/cybersquat/.

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