This article was originally published in the Spring 2004 edition (Vol. 4, No. 1) of Thelen Reid's Intellectual Property and Trade Regulation Journal.
Hijacking of domain names is an ongoing problem faced by companies. The fight to protect their trademarks from use by a third party of a confusingly similar misspelled domain name was forced on many companies, including the New York Stock Exchange, The Wall Street Journal, Paine Webber, Air France, Electronics Boutique and Disney.[1] The fight to protect their trademarks from being used to divert users to competitors' Web sites was fought on the discount travel front by Air France, US Airways, Lufthansa, British Airways, Qantas Airlines, Alitalia Airways, Holiday Inn Hotels, Hilton Hotels and Marriott Hotels.[2]
All of these companies stopped the third parties' use of their misspelled trademarks through either the United Nations Trademark and Copyright Agency WIPO (the World Intellectual Property Organization) or the U.S. courts. The risks of having to expend the time and money to do so can be minimized through the proactive steps of registration and monitoring.
Squatting
Cybersquatters register domain names based on a company's trademarks and then attempt to extort payment from the actual trademark owner in exchange for returning use of the domain name. For example, although the trademark AIR FRANCE is owned by Air France, a cybersquatter would register www.airfrance.com and then offer to sell back such domain name to Air France.
Typosquatters are a variation on cybersquatters, but the motive of both is the same: to profit by trading off of the goodwill of intellectual property assets established by rightful owners.
Typosquatters register intentionally misspelled domain name variations of the actual company's trademark. The typosquatter profits by directing traffic away from the actual Web site to the typosquatter's rogue site.
Typical typosquatting methods are "mousetrapping" and "redirecting." "Mousetrapping" traps the user who has mistyped a domain name in a Web site that inundates the user with advertisements and will not allow the user to escape the Web site.
"Redirecting" redirects the user to another Web site that typically shows a competitor's product or the opposing view of another group. In the case of Air France, which operates the Web site www.airfrance.com, typosquatters registered the similar www.airfranceairlines.com and the misspelled www.arifrance.com to divert users to a Web site selling discount travel deals. In the case of Microsoft's popular Carpoint car buying service at www.carpoint.com, users were redirected to wwwcarpoint.com, which offered a competitive service to Microsoft's. Sometimes the competitor's "product" is an opposing viewpoint, as in the case of Planned Parenthood, which failed to register www.plannedparenthood.com. The domain name was registered by a third party and directed users to an antiabortion Web site. Other groups that have fallen victim to redirecting include Britney Spears, Disneyland, Teletubbies, Radio Shack, Office Depot, Nintendo, Hewlett-Packard, the Dave Matthews Band and Encyclopedia Brittanica.
Profit Motive
Typosquatters profit from redirecting traffic. Users click on the ads and advertisers pay money to the Web site owner for directing traffic to its ads. Typically, the payment is 10-25 cents for every click on an ad. Mousetrapping allows typosquatters to quickly rack up profits because once the user realizes their mistake and attempts to exit the site by closing the browser or clicking on the "back" button, new windows with advertisements open over and over again. One typosquatter admitted he earned $800,000 to $1 million per year on more than 3,000 Web sites.
The fee for diverting users to a site they did not choose is typically 3-5 cents. The owner of phony travel discount sites earned $3-5 per travel ticket sold as a result of directing traffic to Cheap Travel Network or QIXO.com. One typosquatter boosted his profits by using children's frequent spelling errors to redirect them to pornographic Web sites.
VeriSign, Inc., the ".com" and ".net" registry that handles over 10 billion domain name interactions per day, also realized the profitability of mistyped domain names. Rather than its users receiving an error message for an unregistered domain name, VeriSign redirected users with misspelled or unassigned domain names to a search page it owned that offered links to sites with similar names, along with a search box and Web directory of advertising. Lawsuits followed, first by competitors of VeriSign's new service, such as AOL and Microsoft, against VeriSign claiming antitrust violations, and second by VeriSign against the worldwide domain name policy organization, Internet Corporation for Assigned Names and Numbers (ICANN), claiming breach of contract.
Remedies
Remedies for the rightful trademark and domain name owner are available both through WIPO and through the U.S. courts. WIPO has a dispute resolution procedure, the Uniform Domain Name Dispute Resolution Policy (UDRP), that many victimized companies have turned to instead of civil litigation. In the past three years, the UDRP has resolved more than 5,000 squatting cases.
To prevail in a UDRP action, the owner of a trademark must show:
1. the domain name is identical to or confusingly similar to a trademark of the trademark owner;
2. the domain name registrant has no legitimate interest in the domain name; and
3. the registered domain name is being used in bad faith.
Although UDRP decisions are final and there is no right to appeal, an unsuccessful plaintiff may subsequently bring a civil action because the UDRP's decision does not result in claim or issue preclusion.
Federal law also provides a remedy. Under the Anticybersquatting Consumer Protection Act (ACPA), a court can issue an injunction, transfer rights back to the rightful trademark owner, cancel the domain name, or award damages. ACPA makes it illegal for a person to register, with a bad faith intent to profit, a domain name that is identical or confusingly similar to a distinctive or famous trademark. A plaintiff can demonstrate the domain name registrant's bad faith using a number of enumerated factors including the absence of intellectual property rights in the domain name; the lack of use of the domain name as a trademark or service mark; the lack of use of the domain name for noncommercial or fair use purposes; and the registration or acquisition of multiple domain names known to be identical or confusingly similar to marks of others that are distinctive. The rightful trademark owner can elect actual damages or statutory damages of $1,000 to $100,000 per domain name, and can even claim attorney's fees in exceptional cases of willful bad faith.
Under ACPA, a court assessed one typosquatter damages of $500,000 for his registration of five domain names similar to the trademarks owned by Electronics Boutique. Another court forced a squatter to disgorge nearly $2 million in profits.
Potential plaintiffs must weigh several factors in deciding whether to pursue their claim under the UDRP or ACPA. Although the UDRP is less expensive, and litigation and decisions are rendered more quickly, its only remedy is domain name transfer. In contrast, the ACPA allows for transfer of the domain name as well as a claim for monetary damages. Additionally, while ACPA requires a plaintiff to have U.S. trademark rights, the UDRP recognizes plaintiffs with trademark rights in any country.
Be Proactive
Domain name policy provides the basis for the existence of cybersquatters and typosquatters because it allows registration on a first-come, first-served basis. The proactive steps that companies can take to prevent having their intellectual property rights squatted on are registering their trademark and similar variations as a domain name, and monitoring the Internet for use by third parties of confusingly similar domain names.
Endnotes
1. The legally owned domain name and corresponding domain names registered by typosquatters were: www.nasdaq.com (typosquatter registered www.nasdasq.com); www.wallstreetjournal.com (typosquatter registered www.wallsreetjournal.com); www.painewebber.com (typosquatter registered wwwpainewebber.com); www.ebworld.com (typosquatter registered www.electronicboutique.com, www.eletronicsboutique.com, www.electronicbotique.com, www.ebwold.com, and www.ebworl.com); and www.disney.com (typosquatter registered www.dosney.com). Other companies that had their trademarks typosquatted include: www.abercrombie.com (www.abercrombieandfitch.com, www.abrecombieandfitch.com, www.abocrombie.com); www.ticketmaster.com (www.ticketsmasters.com, wwwticketmasters.com, wwwticketsmaster.com, www.ticketmaser.com, www.ticketmaste.com); and www.playstation.com (www.playstaion.com, www.plystation.com).
2. The corresponding domain names registered by an unrelated third party were www.us-airways.net, www.lufthansa-airlines.net, www.british-air-ways.com, www.qantas-airlines.com, www.al-italia.com, www.holidayinnhotels.org, www.hilton-hotel-reservation.com, and www.marriot-hotels.com.
For more information, please contact:
Kelly M. Slavitt
212.603.6553
kslavitt@thelenreid.com
©2004 By Thelen Reid & Priest LLP. This article has been published as an information service to clients and friends. Please recognize that the information is general in nature and must not be relied upon as legal advice. The authors, listed above, or your Thelen Reid attorney contact, would be happy to discuss the information in this article in greater detail and its application to your specific situation. We welcome your comments and suggestions.