Legal Angles
Legal Angles
2006 Dilution Act
Anticybersqatting Consumer Protection Act
History of domain litigation
Trademark Dilution

This race for new domain names is becoming especially crowded as old-economy firms attempt to catch up and extend their trademarks for specific properties to Internet addresses. With an estimated 10 new domain names being registered every few minutes, the economic future of some companies may lie in the balance. Coupled with this battle pitting domain name holders and trademark holders (called either “cybersquatting” or “homesteading,” depending what side of the fence you are on) against one another is the war between holders of the same trademarks, often from different countries.

In late 1999, both the Internet industry and the United States Congress entered this battleground. Their actions hold significant implications for the future of Internet governance and global trade relations.

Last October, after intensive deliberations, the Internet Corporation for Assigned Names and Numbers (ICAAN), the international corporation established to privatize the governance of domain names through the private sector’s participation, adopted a set of policies and rules concerning arbitration of domain name disputes. These policies, the Uniform Domain Names Resolution Policy (UDRP), and additional procedural rules are incorporated into the online agreements that the domain name registrars (such as Network Solutions, Inc.) require each party to adhere to as part of the registration process for new domain names. The rules call for the appointment of either one or three arbitrators. (Whether registrants have sufficient notice of these rules is another issue. Consumer groups contend that sufficient notice is not given to registrants. Courts and legislatures are now dealing with this problem.)

In essence, the UDRP rules provide for arbitration of domain name disputes where the complaining party alleges that a domain name is “identical or confusingly similar” to a trademark existing at the time of registration. Arbitration takes place under the auspices of an approved third party, for example, the World Intellectual Property Organization (WIPO), located in Geneva, Switzerland. WIPO has enacted its own supplementary procedural rules. The ICANN rules provide for only one remedy, the transfer of the domain name. However, the arbitration is not the final word. Under the UDRP rules, filing a suit in a national court of competent jurisdiction will defeat the arbitration proceeding or award. Local litigation will have supremacy.

A few weeks after the ICAAN rules came into force, in late November, new Congressional legislation (“Anti-Cybersquatting Legislation”) became effective. The legislation addressed the same issue of trademark infringement by domain name holders, using the same standard in establishing ownership of a registered domain name. However, the statute imposes civil penalties and authorizes the awarding of legal fees. The statute was a result of lobbying by many old economy firms that failed to register their desired domain names early on and were only able to play catch up by Congressional intervention. Critics of the legislation claim that this legislation may violate the First Amendment right of free speech, represent an unfair extension of trademark law to Internet addressing and restrict the valuable Internet business of name speculation and name arbitrage.

These parallel developments, the ICANN rules and the new federal legislation, simply do not help a foreign company that has a claim for a domain name held by a U.S. firm. Neither are they beneficial in protecting U.S. firms from law suits abroad or in terms of promoting global governance generally for this corner of the Internet.

A foreign firm may request arbitration under the ICAAN rules and utilize the services of WIPO. And if it wins? The losing party -- let’s assume it is an American firm -- will most definitely bring suit in the United States, as it is entitled. Thus, the time and effort the foreign firm spent in arbitration under the ICAAN (and WIPO) rules would have been wasted. The new U.S. legislation is now controlling the issue, and that legislation only protects U.S. trademarks, not foreign trademarks. Thus, foreign firms may find themselves at a huge disadvantage.

Congress’ jumping the gun may have been an understandable response once it is realized that some very large U.S. firms, such as Morgan Stanley, were behind the curve in understanding the critical importance of the Internet and domain names. Congressional legislation has severely short-circuited the Internet industry as well as international efforts to fashion a mechanism to ensure equitable development worldwide of the Internet and the domain name system.

Though understandable, Congress’ approach falls short. The better approach would be to strengthen the ICAAN rules. The rules should be improved by providing for exclusive and binding arbitration under WIPO, a permanent panel of arbitrators, explicit protection of foreign trademarks, and the avoidance of unilateral American legislation -- which may end up clashing with that of other nations. Indeed, other nations are developing their own rules concerning domain names, such as the U.K. and Germany, which apply tough remedies. It is highly likely that the U.K. would apply their rules to a dispute involving a U.S. trademark and two British firms or foreign firms it considers itself having jurisdiction over (for example, an American subsidiary). It is certainly possible that British courts could reach a decision contrary to one the U.S. courts might reach.

Forcing foreign firms to litigate their trademark claims involving names in U.S. courts does not inspire confidence that the Internet is a global (as opposed to an American controlled) medium or captive colony. This American approach to regulating the Internet, presumably because the servers of the registrars for the top-level domain names are located within the United States, will become less defensible as more and more people and firms throughout the world become connected to the Internet and engage in global commerce and trade. Once registered, the sites can be maintained on servers throughout the world. After all, the smallest and most local website can garner and place orders, and conduct transactions with others located in the most remote places in the world.

It is in the interest of American firms, especially those doing business overseas, to favor more of a global approach. A U.S. firm may find itself dragged into a foreign court to litigate its name under the rules of that foreign jurisdiction. Obviously, this approach could lead to messy and unsettled conflicts of law and multi-jurisdictional issues that have little chance of a prompt and satisfactory resolution. The best-case scenario from this situation is that many lawyers would be scurrying back to their old law school books to try to find obscure law they can attempt to apply it to new and novel questions concerning global commerce and Internet transactions.

There are even brazen attempts by certain international law firms that on behalf of their clients claim rights to generic names or so called key-words that have been used in their clients' trademarks.

The Internet is a global medium, inherently borderless but existing in a world where borders exist. Rules governing domain names should be mutually agreed upon internationally. In the long run this approach will be best for all.