Protecting Brand Value on the Internet

San Diego Business Journal, August 7, 2000 by Wayne Benjamin Brown

Just mention the, names Yahoo and eBay, and you will realize how quickly a new brand can enter a consumer's consciousness. Branding is one of the hottest issues now in the management of start-up Internet and high-tech companies. The conventional wisdom that many years are required to establish brand value has fallen by the wayside. New companies are creating brand value in a matter of months.

Given the value of branding, how does a company prevent piracy, cyber-squatting and other improper use of its brand on the Internet?

Trademark and unfair competition law remains an important, traditional tool for protecting branding in both the real and internet worlds. For example, GoTo.com successfully used trademark law to prevent Disney's Internet use of a mark similar to GoTo.com's. But, traditional trademark law, which developed in response to trademark abuses in the real world, has shown certain enforcement limitations of speed and scope in the battle against cybersquatters.

These shortcomings in traditional trademark law prompted the development of two new and powerful methods for fighting cybersquatting and other domain name abuses. These new weapansare the Anticybersquatting Consumer Protection Act (ACPA) and the Uniform Domain Name Dispute Resolution under ICANN. The ACPA provides a broad set of remedies but entails the time and expense of filing an action in federal court. The ICANN procedure is quicker and less expensive, but provides limited remedies, usually involving the transfer of the domain name back to the rightful trademark owner.

Under the 1999 Federal Anticybersquatting Act, a valid trademark holder can cancel or regain control of a wrongfully registered domain name and obtain monetary damages from the wrongdoers. The Act requires the plaintiff to have a protected mark that is either distinctive or famous and that the accused domain name be either identical, confusingly similar, or in the case of a famous mark, dilutive. The Act further requires that the accused party have engaged in either registering, trafficking, or using the domain name. The final required element of the Act is piracy; namely the plaintiff must prove bad faith on the part of the accused domain name registrant.

The piracy factors are culled from previous trademark law that grappled with early trademark/domain name disputes. None of the factors are dispositive alone. Each is a factor that the court must weigh. And as shown in the recent decision, Sporty's Farm LLC v. Sportsman's Market, Inc., on a case by case basis the courts may consider and develop additional piracy factors.

The Act provides for a range of remedies, including cancellation or transfer of the domain name, and recovery of profits or an award of statutory damages of up to $100,000 per domain name. The Act covers improper domain name registrations made either before or after the enactment of the Act.

In the first cases applying the Anticybersquatting Act, the trial courts have vigorously enforced the Act. And in the first appellate decision, Sporty's Farm LLC v. Sportman's Market, Inc., the court applied and enforced the Anticy-bersquatting Act, even though the wrongdoing and trial occurred before the ACPA became law.

The second new weapon in the trademark owner's arsenal is the arbitration procedure made available by ICANN. ICANN stands for Internet Corporation for Assigned Names and Numbers. One drawback to the ICANN procedure is that federal courts may not be bound by theICANN arbitration decision. WeberStephen Products Co. v. Armitage Hardware and Building Supply, Inc., N.D. Ill., No. 00 CC 1738, 5/3/00. Still, the new policy is an advance over previous ICANN procedures. Previously, ICANN simply held up registration of a new domain name if there was a protest by one who claimed to be the trademark owner. It was difficult to get cases resolved under this old policy. Now, ICANN has adopted a streamlined and effective procedure by which trademark owners rapidly can bring and conclude an arbitration proceeding against accused domain users. This procedure is invoked by filing an action with the World Intellectual Property Organization or other such approved agencies under the ICANN policy.

In order to prevail on an ICANN claim, a company that is the valid owner of a trademark must show three things:

(1) that the accused domain name is identical or confusingly similar to the trademark owner's mark;

(2) that the accused domain name registrant has no legitimate interest in the domain name; and

(3) that the accused domain registrant had bad faith.

In its defense, the accused domain holder may attempt to show legitimate interest factors such as demonstrable preparations to use, evidence that the accused was commonly known by the domain name, or evidence of the accused legitimate non-commercial use of the domain name.

In one of the first tests of the procedures under ICANN, the World Wrestling Federation ("WWF") brought an ICANN action against an individual in Australia who had registered the WWF's trademark as a domain name. The accused registrant contacted the WWF a mere three hours after registering the name and demanded that the WWF pay him $1,000 to transfer the domain name to the WWF. True to form, the WWF battled back in an effort to take the unlawful domain name registrant to the mat. Normally, filing a suit against a foreign defendant such as the Australian defendant here, would prove to be an expensive and often futile effort. But, using the streamlined and inexpensive ICANN procedures , the WWF successfully and quickly recovered its domain name, thus protecting its brand value and achieving the first ICANN "smack down."