Ninth Circuit Limits CyberSquatting Liability

file00044006658Cybersquatting is a major problem for large companies that seek to protect the integrity of their businesses. Companies are prohibited from registering a domain name using the trademarked name of another company with the intent to profit from the trademark. Some courts have even gone so far as to hold domain name registry companies liability for assisting in cybersquatting. However, the 9th Circuit recently limited the ability to recover for so called contributory cybersquatting.

In the case of Petronas v. GoDaddy.com, Petronas, a Malaysian oil company, sued the internet’s largest domain registrar, GoDaddy alleging that it had assisted in forwarding domain names “petronastower.net” and “petronastowers.net” to an adult entertainment site. Petronas sued GoDaddy, alleging that by registering the domain names and forwarding them to the adult website GoDaddy violated the Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d) (ACPA).

Generally, secondary liability for trademark infringement was available under the predecessor law to the ACPA. Petronas argued that Congress had intended this right to also be available when it codified these principles in the ACPA. However, the 9th Circuit disagreed. The court held that a domain registrar could not be held liable for contributory cybersquatting because contributory cybersquatting was not explicitly created under the text of the ACPA, the legislature did not exactly codify the proceeding law, and because establishing contributory liability for cybersquatting was not consistent with the goals of the ACPA.

The court heavily relied on the fact that holding domain registrars liable for the intents of their customers would be difficult to manage and cause the registrars to become overly worried about cybersquatting and take down valid websites in fear of potential liability. Further the court found that the remedies available under the ACPA already allow companies the ability to recover against cybersquatters.

Cybersquatting Liability

Cybersquatters often register domain names and then demand a hefty price tag to give the business owner control of the domain. If you have been the victim of cybersquatting you have a couple of options. You can either sue under the ACPA, like Petronas did or use the Internet Corporation of Assigned Names and Number’s (ICANN) international arbitration system. The decision to pursue litigation or arbitration should be determined by experienced legal counsel because each route has distinct advantages and drawbacks.

To prevail under ICANN arbitration a party must show that 1) the domain name was confusingly similar or identical to the trademarked name, 2) the alleged cyber squatter has no rights or legitimate interests in the trademarked name, and 3) the domain name was registered in bad faith. If the party prevails the name will be transferred to the rightful trademark owner or canceled. Although this arbitration is relatively fast, one big drawback is that the ICANN arbitration does not award monetary damages.

By contrast, a lawsuit under the ACPA does allow money damages in addition to a court ordered transfer of the domain or cancelling of the domain. As with the ICANN arbitration the name of the domain does not have to be the exact domain name, just identical enough to be confusingly similar. However, under the ACPA the domain also has to have been distinctive at the time it was registered as a US trademark, and the owner must have been the first to use it in commerce.

Domain Registry Litigation and Arbitration

To learn more about cybersquatting litigation and dispute resolution contact the Law Offices of Tony T. Liu at (714) 415-2007.