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Anticybersquatting





May 26, 1999 

Sponsoring Committee: Special Committee on the Internet, on behalf of itself and its predecessor, the Internet Subcommittee of the Issues and Policy Committee


Resolution

WHEREAS, trademark infringement and dilution problems have increased exponentially over the past few years, in large part, due to acts of "cybersquatting," which generally refers to the registration and trafficking of Internet domain names with the bad-faith intent to benefit from another's trademark

WHEREAS, existing domain name regulations do not expressly prohibit cybersquatting, which has produced inconsistent judicial decisions and created extensive monitoring obligations and uncertainty for trademark owners; and

WHEREAS, cybersquatting damages the growth of electronic commerce, results in consumer fraud and confusion as to the true source of products and services, and deprives legitimate trademark owners of substantial revenues and consumer goodwill.

BE IT RESOLVED, that INTA condemns cybersquatting; and

BE IT FURTHER RESOLVED, that INTA urges the development of appropriate national legislative, regulatory, administrative, or international mechanisms, including treaties, to combat cybersquatting, which mechanisms must, at a minimum, include the following: 

  1. Provisions that prohibit and provide sanctions against cybersquatting.
  2. Clear remedies for trademark holders, including the availability of injunctive and other appropriate relief.
  3. To the extent that they are recognized in relevant jurisdictions, protection of the public interest, including the legitimate uses of domain names that meet fair use/freedom of expression standards.

Background

Report of the Special Committee on the Internet Concerning the Resolution on the Condemnation of Cybersquatting and the Advocacy of Anticybersquatting Mechanisms

Why Should "Cybersquatting" Be Condemned?
The INTA "White Paper": Trademarks on the Internet states that "trademark owners and their representatives throughout the world are struggling with the emerging issues presented by the proliferation of electronic communications." Cybersquatting is central to these concerns. Trademark holders are battling thousands of cases of cybersquatting a year - the vast majority of matters cannot be resolved through Network Solution's (NSI) dispute resolution policy. (INTA member Bell Atlantic Corporation recently testified before WIPO's Panel of Experts that it experienced close to 1,000 different infringement matters in a 12 month period. Many of these matters resulted in cybersquatting. Of the nearly 1,000 cases, only 10 could be resolved through the NSI dispute resolution policy. These numbers appear to be consistent with those experienced by other trademark owners.)

While there is no established definition for "cybersquatting," members of the Special Committee on the Internet generally refer to this activity as the registration and trafficking of Internet domain names with the bad-faith intent to benefit from another's trademark. In particular, famous and well-known marks have been prime targets of cybersquatters, who, unless they are stopped, will likely become the "pirates" of the new millennium. The World Intellectual Property Organization (WIPO) in addition to identifying cybersquatting as a global problem, recognized in its interim report on the domain name process that, indeed, "[f]amous and well-known marks have been the special target of a variety of predatory and parasitical practices on the Internet." (World Intellectual Property Organization, The Management of Internet Names and Addresses: Intellectual Property Issues, December 23, 1998). The Special Committee on the Internet finds that cybersquatters target famous or well-known marks for a variety of reasons, including:

  1. to extract payment from the rightful owner of the mark, who are likely to have greater financial resources;
  2. to offer the domain name for sale to third parties on a Web site;
  3. to use such names for pornographic sites or otherwise capitalize on customer confusion; and
  4. to engage in consumer fraud, including counterfeiting activities.
The problem of cybersquatting has expanded beyond the generic top level domains ("gTLDs"), such as .com, to the country code top level domains (ccTLDs). Some of the lesser known ccTLDs have actually become piracy havens in which the local agent offers to sell domain names to the highest bidder, without any consideration of trademark rights (i.e. .tv, .tm). Other ccTLD registration authorities "reserve" names of famous marks and offer to sell them back to the rightful trademark owner.

Cybersquatting, despite the problems it presents to trademark owners and consumers, is not illegal per se. In other words, there are no laws in any jurisdiction, national or otherwise, that explicitly prohibit the practice. Courts, particularly those in the United States where cybersquatting is an especially pressing issue, have typically utilized traditional concepts in trademark law to provide trademark owners with remedies for harm caused by piracy on the Internet. For example, in one case, the court ruled that the defendant's attempt to sell a domain name to the owner of a famous trademark was akin to a "use in commerce" and was therefore covered by the Lanham Act's dilution provision. (See Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227 (N.D. Ill. 1996)(defendant's intention to arbitrage the "intermatic.com" domain name constitutes commercial use under the Lanham Act)).

Unfortunately, some cybersquatters have read these cases carefully and have taken the necessary precautions to insulate themselves from liability. Cybersquatters register well-known trademarks - by the hundreds and thousands - but in most cases - do not post an active Web site. This activity is traditionally referred to as "warehousing." In addition, cybersquatters are now careful to no longer offer the domain name for sale in any manner that could implicate liability under the case law. In the cases of warehousing and trafficking in domain names is not explicitly prohibited, many courts have been unable to provide assistance to trademark holders.

For many trademark owners, the lack of clear anticybersquatting mechanisms have left them without adequate and effective judicial remedies. Despite the fact that cybersquatters are trafficking in domain names, trademark owners in many cases cannot sue without proof of use or an offer to sale. Consequently, trademark owners are forced to engage in a continuing monitoring situation - waiting to see if the cybersquatter begins use of their domain name, offers it for sale to the public or fails to renew the registration with the registration authority.

It is also important to keep in mind that even in cases where a trademark owner can sue, the sheer number of matters, costs associated with litigation, and the difficulty of receiving damages in standard trademark infringement and dilution actions has a chilling financial effect. Frequently, trademark owners weigh the costs and choose to pay off cybersquatters in exchange for the domain name registration. Instances of cybersquatting continue to grow each year because there is little risk for cybersquatters to discontinue their abusive practices.

Principles for an Anticybersquatting Statute

Principle 1 - Cybersquatting: A Prohibited and Sanctioned Activity
Judges, attorneys, the Board of ICANN (the Internet Corporation for Assigned Names and Numbers) and perhaps, most importantly cybersquatters, must be put on notice that activities that include the pilfering of trademarks in cyberspace will not be tolerated, despite the "first-come, first-serve" principle that regulates domain name registration. New anticybersquatting mechanisms, in whatever form they take, must make it clear that cybersquatting is indeed a form of illegal commercial activity. There must be no "wiggle room" in the law or in the guidelines set forth by Internet registrars for those who seek to trade off the goodwill associated with trademarks and the consumer's desire to use the Internet to carry on their commercial activities. To do otherwise, places trademark owners and consumers at continued risk for harm.

Principle 2: Clear Availability of Judicial Remedies
Anticybersquatting mechanisms should award remedies to trademark holders, including the availability of injunctions, damages, and costs for successfully prosecuting a cybersquatter. Such remedies would serve as a deterrent against cybersquatting, significantly reducing the numbers of cybersquatting incidents and saving trademark owners time and money.

Principle 3: Fair Use / Freedom of Expression Considerations
As developed in the case law, defenses to claims of damage to the legitimate interests of trademark owners have included legal and equitable defenses such as free speech or the non-confusing use of a person's own name. In the relevant jurisdictions, future anticybersquatting mechanisms should be designed to accommodate fair use and freedom of expression principles.

INTA Committees Working Together
Anticybersquatting mechanisms will likely take the form of national legislation, regulation, or treaty. It is therefore important to ensure the following: (1) that those initiatives developed by or forwarded to the Special Committee on the Internet do not conflict with the work of other INTA committees who operate in those respective realms and (2) that the anticybersquatting mechanisms comport with previously established INTA policies.

Accordingly, it is expected that the Special Committee on the Internet will receive the "advice and consent" of other appropriate INTA committees on any proposals concerning anticybersquatting mechanisms which they review or develop on their own. Moreover, it is expected that the Special Committee on the Internet will benefit from the wisdom and experience of committees such as Legislation Analysis, Regulatory Analysis, and Treaty Analysis.

Activity in the United States Congress
The introduction of this resolution is timely, since anticybersquatting legislation is currently being discussed in the United States Congress. INTA's U.S. Legislation Subcommittee and the former Internet Subcommittee offered comments on the language of this proposal, but have not taken an official position, since the Association currently has no policy with regard to such measures. If this resolution is approved, the Special Committee on the Internet, in conjunction with the Legislation Analysis Committee, will then communicate INTA's position to the Congress and take a more active role in the development of anticybersquatting legislation in the United States. In addition, the relevant committees within INTA will contact IP associations, well-known mark holders, and other interested parties to ensure there is a global effort in the creation of anti-cybersquatting mechanisms.

Conclusion
Cybersquatting is a malicious act that is damaging to the interests of INTA members around the globe and the consumers who purchase goods and services via the Internet. Moreover, trademark piracy in cyberspace results in consumer fraud and confusion and is detrimental to brand equity during this critical transition to a global marketplace that is heavily influenced by electronic commerce.

There is a risk that cybersquatting problems will increase, especially if ICANN approves the introduction of new generic top-level domain names at a rapid pace. Therefore, now more than ever, consumers need the certainty that the brands they seek on the Internet are leading them to the legitimate source of products and services. INTA, on behalf of its members, as well as consumers, must deliver a strong and convincing statement that this issue must be taken seriously and mechanisms put in place to put the "brakes" on what has already proven to be a serious and costly problem.

For the aforementioned reasons, the Special Committee on the Internet requests that the Board of Directors adopt the preceding resolution.