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Legal Options for Evicting a Cybersquatter

You invested millions building a brand identity. You poured all that brand equity into a Web site and reserved a domain name incorporating your trademark. The day after your big press release, you find that someone else has registered a similar domain name containing a variation of your trademark. What can you do?

The practice of registering domain names incorporating other people’s trademarks is called cybersquatting. A cybersquatter typically does not conduct any legitimate business under the domain names it registers. Rather, the cybersquatter attempts to profit by selling or renting the domain name back to the trademark owner.

There are four basic ways in which a trademark owner can respond to cybersquatting: ignore it; threaten legal action but pay the ransom; initiate an arbitration proceeding; or initiate a federal lawsuit. The best approach depends on the strength of the trademark, the importance of the domain name and the costs of the chosen method.

In many instances, a cybersquatter can safely be ignored. If the cybersquatter has registered a variant of the trademark that is unlikely to be entered mistakenly by a casual Web surfer or to be of value to a competitor, and the trademark owner has a strong, well-established site with a well-executed search engine strategy that drives traffic to the genuine site, the cost of pursuing the cybersquatter may not be justified.

In other cases, it may be most cost-effective simply to pay the ransom. Many cybersquatters are small-time “entrepreneurs” hoping for a few thousand dollars from their domain name coup. A threatening letter from counsel may provide enough negotiating leverage to make the asking price more reasonable than the cost and uncertainty of litigation.

When the cybersquatter remains unreasonable despite threats from counsel, or the trademark owner decides to stand on principle, an arbitration proceeding under the Internet Corporation for Assigned Names and Numbers Uniform Dispute Resolution Policy may provide a relatively cheap alternative to a lawsuit.

Proceedings under ICANN rules are heard by private dispute resolution organizations. These organizations typically offer a roster of attorneys and retired judges who arbitrate the domain name dispute for a fixed fee. Fees average $1,000 to $2,500 but vary among the providers, depending on whether the dispute is heard by a single arbitrator or a panel.

ICANN proceedings are based entirely on written submissions and documentary evidence. There are no pre-hearing discovery procedures. Each side simply submits its arguments and evidence to the arbitrator. This can greatly speed the process and reduce the costs normally associated with litigation. In addition, an ICANN proceeding is initiated simply by filing a complaint with a dispute resolution provider and transmitting a copy to the cybersquatter’s registered e-mail and physical addresses. This can provide an advantage over litigation, as it can be difficult

to determine the true physical location of a cybersquatter who is hiding behind a phony registration identity and address, much less to serve process in a lawsuit.

The limited scope of an ICANN proceeding, however, also can be a pitfall. It is difficult to submit supplemental information after the initial complaint is filed, and there is no right of appeal. A trademark owner must be careful in its initial complaint to present sufficient evidence of its trademark rights as well as evidence that the cybersquatter is acting in bad faith.

Another potential disadvantage to the ICANN procedures is that they offer only two remedies: forfeiture of the domain name by the cybersquatter or transfer of the domain name directly to the trademark owner. There is no opportunity to recover money damages.

Finally, the ICANN procedures apply only to generic top-level domains – .com, .org and .net. The ICANN procedures do not apply to country-code top-level domains. It is unclear whether the ICANN procedures will apply to the recently approved additional top-level domains.

Given these advantages and disadvantages, an ICANN proceeding may be most appropriate when the domain name in question is important, but not vital, to the trademark owner and a quick, cost-effective resolution is desired, or when it is unlikely that the cybersquatter could be located to be brought into federal court in the United States.

The final option is to file a lawsuit in federal court under the Anticybersquatting Consumer Protection Act. Like the ICANN procedures, the anti-cybersquatting act requires the trademark owner to show that it does, in fact, own the trademark at issue and that the cybersquatter adopted the domain name in bad faith. Unlike the ICANN procedures, however, the act allows for money damages or, if actual monetary harm cannot be proved, for automatic statutory damages of $1,000 to $100,000 per domain name. In exceptional cases, the act also permits a prevailing party to recover its attorney’s fees from the cybersquatter.

If the trademark owner wishes to seek money damages, the claim can be filed only in a federal court with personal jurisdiction over the cybersquatter. This can be problematic when the cybersquatter resides in a jurisdiction that is inconvenient for the trademark owner. Indeed, the problem might be insurmountable if the cybersquatter resides outside the United States. Moreover, it may be difficult to serve a summons on a cybersquatter, even if the cybersquatter does reside in the United States, particularly if the cybersquatter has used fictitious names and addresses in connection with his registration of the domain name.

The cybersquatting act also has an “in rem” provision for filing an action in the jurisdiction of the relevant domain name registrar, but that provision does not allow for money damages. In addition, an “in rem” action is not available if the registrar of the challenged domain name is not located in a jurisdiction within the United States.

Because an action under the act is brought in federal court, the trademark owner has access to the full arsenal of litigation discovery devices, such as document requests and depositions. Discovery procedures, however, can be time-consuming and costly, and discovery goes both ways. An aggressive cybersquatter can seek burdensome discovery concerning the trademark owner’s rights. The need for court appearances, motions and the like also may increase the cost of a federal court action.

Given these advantages and disadvantages, a federal court action may be most appropriate where the domain name is very important to the trademark owner’s business and it is likely that the cybersquatter can be located in a convenient jurisdiction within the United States.

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