educational

Your Brands and Potential .XXX Cybersquatters

Gregory Piccionelli
The battle over whether ICANN should approve a new .XXX top-level domain has seemingly reached a fever pitch.

In early August, ICANN passed a resolution regarding the application for the .XXX TLD by ICM Registry. Soon after, ICM posted on its site: “ICM Registry is delighted to announce that the ICANN Board has approved the .XXX toplevel domain ... . [W]e expect to go live with .XXX domains at the start of 2011, if not sooner.”

Disputing ICM’s assertion that the new TLD was in fact approved, Diane Duke, executive director of the Free Speech Coalition stated on FSC’s website, “FSC has emphasized all along that .XXX is far from being passed and that is still the case. We will continue to organize the industry in voicing its opposition to this dangerous and costly TLD though all avenues available to us including, but not limited to, the upcoming ICANN public comment period.”

While it is clear that the war over is not over and ICM may still fail to establish a new TLD, the latest developments have brought the proposed .XXX TLD closer to becoming a reality than at any time in the past.

As a result, there has been increased amount of inquiries to our offices from domain name owners concerned about competitor registration of similar or identical .XXX versions of their domain names, company names, brands, or content lines.

Given that it has been reported that ICM has allowed pre-registration of thousands of domain names, I think that owners of domain names in other TLDs might well have reason to be concerned.

In fact, I think it is likely that if .XXX is approved, and actual registration and use of the .XXX TLD commences, there will inevitably be a large number amount of resulting domain name disputes.

Because of this, I thought that it seemed like a good time to provide our readers with some protective informational armor regarding domain name disputes and their resolution.

Two paths. Basically, a domain name dispute can arise when one party owns or is using a domain name that another party feels they should not. But regardless of how a dispute starts, they will ultimately take one of two paths: amicable resolution or litigation.

Amicable resolution usually means one party either stops using the domain name or transfers it to the other party when requested.

In friendly transfer situations, the transferring party is often paid a fee by the transferee. But domain names also are often transferred merely upon request without a fee. Fortunately, this happens more than you might think.

The other path, litigation, generally means that the aggrieved party has elected to engage one of two litigation options available in the U.S. for domain name dispute resolutions.

One way to solve the problem: make a federal case of the matter. In the U.S., when a domain name dispute breaks out the parties can always turn to the federal courts.

This is because in 1999 Congress passed the Anticybersquatting Consumer Protection Act, or ACPA. The purpose of the law is to provide individuals and companies with a means to take over domain names that incorporate their personal names or are confusingly similar to their trademarks.

In addition to the transfer or cancellation of a domain name registration, the statute provides other powerful remedies to a successful plaintiff. For example, the mark owner can also recover up to three times his actual damages and obtain injunctive relief. Actual damages include the profits the domain name registrant made from his use of the mark, as well as losses sustained by the mark holder as a result of the domain name registrant’s actions, such as lost sales or harm to the mark’s value.

In lieu of actual damages, the mark owner can elect to recover statutory damages of between $1,000 and $100,000 per domain. The actual amount awarded is fixed by the court in its discretion. Also in exceptional cases, attorneys fees can also be recovered.

Regardless of whether the domain name at issue involves a personal name or a trademark, to prevail in an action brought under the ACPA a plaintiff must establish that the defendant registered the domain name in bad faith.

The statute provides a noncomprehensive list of factors that a court can consider to determine whether the domain name was registered in bad faith.

For example, regarding bad faith registration of a domain name implicating another party’s trademark the court can consider, among other things, any of the following:

  • Whether the domain name holder has trademark rights in the domain name;
  • Whether the domain name holder is attempting to divert consumers from the trademark owner’s website;
  • Whether the domain name holder offered to sell the domain name to the trademark owner or another party for financial gain without having any intent to use the mark with the sale of goods or services;
  • Whether the domain name holder’s actions constitute a pattern of registering and selling domain names without intending to use them in connection with the sale of goods or services;
  • Whether the domain name holder provided false information when applying for the registration of the domain name; and,
  • Whether the domain name holder has previously registered domain names of other parties trademarks.

While the remedies under the ACPA are tremendous, the cost of bringing a federal lawsuit can be prohibitory for many adult entertainment companies, even though the statute provides for the possibility of reimbursement of attorney’s fees. Also, often the offending party is located in a foreign country, which can raise significant service and jurisdiction issues, further increasing the cost of the litigation. Because of this many parties choose to have their dispute resolved through a special procedure provided for under the Uniform Domain Name Dispute Resolution Policy, or UDRP, created by ICANN.

The Uniform Domain Name Dispute Resolution Policy. Under this policy, which most registrars throughout the world make a required term of name registration agreements, a trademark owner can initiate a relatively inexpensive procedure to wrestle away or cancel a domain name registered by another party, even if that party is offshore.

The procedure is essentially a one-shot, non-appealable, administrative petition that is adjudicated before either a single member or three-member administrative panel. The initial election of whether the matter will be ruled on by one or three panelists is made by the party filing the petition.

In a UDRP procedure the trademark owner essentially must prove: (1) ownership of the trademark that is the same or confusingly similar to the domain name; (2) that the defendant has no legitimate right or interest in the domain name; and, (3) that the domain name was registered and used by the defendant in bad faith.

If the trademark owner fails to prove any of the points above, the administrative panel will not cancel nor transfer the domain name.

Like the ACPA, the UDRP Policy sets forth examples of what constitutes bad faith. For example, Paragraph 4(b) states that actions, such as the following, could be considered to be bad faith:

“(iv) By using the domain name, the domain name registrant intentionally attempted to attract for financial gain, Internet users to the registrant’s website or other online location, by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation, or endorsement of the registrant’s website or location or of a product or service on the registrant’s website or location.”

If the trademark owner is successful, the domain name transfer or cancellation can be effectuated pretty much regardless of where the other party resides. But the transfer or cancellation of the domain name is the only remedy in a UDRP proceeding.

This means that, unlike the judge in a successful court action under the ACPA, a UDRP panel cannot order the payment of any damages or reimbursement of attorneys fess or costs of the litigation. The importance of trademarks in all this. As my regular readers know, I have often written about the importance of adult entertainment companies acquiring, protecting, and effectively exploiting trademark rights associated with their products and services.

These days effective branding has become much more than obtaining a valuable competitive edge. Branding has become a matter of survival.

And if the .XXX TLD ever becomes a reality, I think its safe to say that the competitive Jurassic Park-like jungle of a business we call the adult entertainment industry, is likely to produce more than a few Cybersquatasauruses.

So, because of the importance of trademarks, in general, and because most domain name disputes have historically mostly involved trademarks, in particular, I think that it is now more important than ever for adult companies and adult entertainment entrepreneurs to have at least a basic understanding about that wonderful species of intellectual property, we IP attorneys affectionately refer to as “marks.”

Next month, my article will be devoted entirely to trademark basics. We will cover topics such as what a trademark is, how trademarks are important in building a brand, how trademark rights are obtained and protected, and why trademarks are often central in a battle over a domain name.

This article is intended to provide you with only a general overview of domain name dispute resolution options. It is not intended to be an exhaustive tutorial regarding the topic. This article is not intended to be, nor should it be considered to be, legal advice. I strongly urge you to seek the counsel of a qualified and experienced adult entertainment attorney familiar with the matters of the types discussed in this article.

Gregory A. Piccionelli is an intellectual property and adult entertainment attorney. He can be reached at Piccionelli & Sarno at (805) 497-5886 or greg@piccionellisarno.com.

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