AUCKLAND — The registered owner of SexToys247.com, charged with "cyberflying" the domain name in a scheme to drive up its purchase price, was ordered last month to give it up to Melbourne-based 365 Enterprises Pty. Ltd., which operates the online sex toy store SexToys247.com.au.
365 Enterprises argued in the case that a competing online company, AdultShop.com, and a company official of the site, colluded with the registered owner of SexToys247.com, shifting registration names for the disputed domain name — a technique commonly known as "cyberflying."
The reason for the cyberflying, 365 Enterprises said in the complaint, was to find a way to make money selling off the SexToys247.com domain name despite the fact it holds two trademarks — one in Australia and another in the U.S. — for the brand "SexToys247" used in conjunction with the sale of sex toys and novelties.
365 Enterprises said its SexToys247.com.au website is a cash cow, grossing more than $5 million each year. The site was launched in 2010 and that it spends $20,000 a month on radio advertising.
Last year company officials said that they received a message last year from a man who was selling the domain SexToys247.com and that he was approached by one of its rivals in Australia to buy it.
The rival turned out to be AdultShop.com, a direct competitor operated by Malcolm Day that is also based in Australia.
365 Enterprises said that the man asked for a bid of $9,000 for the domain name to "blast their offer out of the water."
But the company declined the offer, citing that it already had marks for the brand name, and later learned that the domain was transferred to an AdultShop IT manager, the complaint said.
"Once the domain name had been purchased by respondent, it then redirected it to AdultShop.com in an attempt to unlawfully trade off complainant’s goodwill in order to misdirect Internet visitors looking for complainant," the complaint said.
After correspondence between counsel for both parties went nowhere, AdultShop's Day advised 365 Enterprises that he had sold the domain name to an unrelated third party, David Gregory, who later said he was willing to sell the domain name for $25,000.
"[365 Enterprises] contends that [Gregory] is not a party unrelated to AdultShop, as according to his LinkedIn page he is a known associate of AdultShop and a former employee, as well as a friend of AdultShop's managing director, Malcolm Day, as shown on [Gregory's] Facebook page," the complaint said.
"[Gregory] knew, or ought to have known (given his well-recorded involvement in the same business), of [365 Enterprises'] marks, domain name, and reputation, and accordingly ... has registered the domain name in bad faith in an attempted cyberflying scheme, or as a cybersquatter on his own account," the complaint said.
The arbitrator agreed with 365 Enterprises in the case, ruling that Gregory registered the domain in bad faith, that he could not adequately rebut a presumption that he worked in conjunction with third-parties to acquire the domain, and that he had full knowledge of trademark rights with the SexToys247 mark.
"[O]n the face of it, respondent made an exorbitant demand for the purchase of the domain name, a practice which has been found to demonstrate bad faith," the arbitrator wrote.
Last month, the domain was transferred to 365 Enterprises.