I’ve won many UDRP cases where the disputed domain name fails to resolve to any website or other content. This is often called “passive holding” and it can give visitors who type in that domain the wrong impression that a brand owner has either gone out of business or has at least failed to give sufficient attention to the online component of its marketing efforts.

In the recent case of Chevron Intellectual Property LLC v. Ancelet Dept / Ancelet, NAF Claim No. FA 1582869 (2014) the Respondent registered 16 domains that incorporate the famous CHEVRON fuel trademarks such as <vouchercertificatesforchevronfuel.com> and <chevronrewardsusa.com>. Upon receiving the complaint the Respondent replied that he runs a small business that generates leads for affiliate networks through e-mails. He also mentioned that the disputed domains were created automatically by software that chooses domains that may be related to a particular campaign.  None of the domains resolve to a website or any other content.

In its decision, the Panel addressed each of the three UDRP component in-turn. However, what I found to be the most interesting comment on confusing similarity was tucked into the discussion of bad faith.  The Panel said “the more distinctive the earlier mark the greater would be the likelihood of confusion.”  This is basic trademark law but its appearance in a UDRP decision should give the owners of famous and distinctive brands reassurance that their strong trademarks will be protected against cybersquatted domains.

Next, the issue of whether the Respondent had any rights or legitimate interest in the domains was discussed.  This is where the passive holding line of attack came into play.  In relation to the Respondent’s non-resolving domain names, the Panel held that “the inactive holding of Internet domain names did not create a viable right or legitimate interest of a domain name because it constituted neither a bona fide offering of goods or services, nor a legitimate noncommercial or fair use”

Finally, in relation to the third component of the UDRP, the Panel noted that a domain owner’s expressed intention to seek affiliate revenue or set up pay-per-click sites “may be a legitimate commercial business and is not, in itself, evidence of bad faith.”  However, she went back to the passive holding argument and found that the “Respondent’s failure to develop a website does not bar a finding of bad faith because by failing to use the domain names in a reasonable time Respondent’s registration of confusingly similar domain names can be construed as having been in bad faith with an intent to sit on and avoid using those domain names in bad faith.”  She then cited a case in which non-use of a domain for a period of three months was held to be sufficient to prove bad faith.  Support of this specific time-frame should prove useful and I plan to cite this decision in future complaints.

The end result is that all sixteen domains were ordered to be transferred to the Complainant. The Respondent was then left with a lesson on why the unsupervised use of automated software to register non-resolving domains that infringe on famous trademarks can be a costly mistake and is no way to run a small business.

When I think about receiving a UDRP complaint I recognize that there are some valiant causes to be defended and many hopeless cases to be conceded.  Confusing the two can be rather expensive for a respondent, as was the case here.

The Two Sides of the UDRP Complaint

The matter started out routinely enough in relation to the domain Glashuette-original.watch.  A demand letter was sent to the Respondent by The Swatch Group, owner of the nearly 90 year old GLASHUETTE ORIGINAL brand for luxury wristwatches.  A reply email was soon received from the Respondent’s lawyer in Hong Kong explaining that his client would happily transfer the domain in exchange for a particular model wristwatch from the brand owner.  This model retails for US$29,000.  There was some further correspondence between the parties during which the Respondent’s counsel repeatedly explained that his client “is prepared to consider anything but not money” in what seemed to be an attempt to avoid triggering section 4(b)(i), seeking “valuable consideration in excess of your documented out-of-pocket costs directly related to the domain name.” Finally, Respondent asked for payment of a few hundred dollars plus a donation of $30,000 to certain charities.  Swatch explained that it already donates considerable sums to charities of its own choosing and gave the Respondent a short deadline to transfer the domain or face a UDRP complaint.

The complaint was filed in due course and, in its response, the Respondent’s counsel submitted an extensive dissertation (with about one hundred pages of attached exhibits) on how its settlement requests were quite reasonable since the Respondent is a collector of fine things such as watches and domain names.  He went to great lengths to make the point that Swatch didn’t obtain this domain during the sunrise period and so the Respondent was entitled to assume that it was appropriate to register the domain himself (although it resolves to a pay-per-click website with links to various competitors in the wristwatch industry).

The UDRP Decision

In its rather brief decision, the Panel characterized this defense as “wholly misguided” and found “Respondent’s story as to why he registered the domain name unconvincing.” To the contrary, his offer to transfer the domain in return for a watch valued at US$29,000 is evidence of his intent to profit from the domain. Even his request for $900 was far in excess of Respondent’s likely out-of-pocket expenses incurred in registering the domain name.

So the lessons from this case are:

• First, if a client asks you to defend a UDRP claim first, make sure you’re familiar with UDRP precedent and not just the plain language of the Policy.
• Second, when it is absolutely clear that your client is going to lose, regardless of how innocent he may claim to be, advise him of this fact and tell him to voluntarily transfer the domain.

If he insists on retaining you to fight an obviously losing battle, then either tell him to find another lawyer or, if you’re more like the Respondent’s counsel in this case, put in tons of irrelevant evidence and then send your client a bill that will hopefully make him think twice before he barrels ahead to register any further infringing domain names (oh, and then try to collect on that bill….)

As anyone who regularly reads this blog has heard me say, there are a surprising number of brand owners and lawyers who have no clue as to how the UDRP operates and the purpose for which it was created. Sadly, this is another of those tails … I mean “tales” … where good money was wasted going after a domain that the complainant had no business pursuing through legal enforcement.

The Complainant does own a registered trademark for SQUIRRELS and has used it, since 2012, to sell computer software and related technology (it’s most well-known product appears to be the Air Parrot app used for screen-sharing between Apple products). It also owns the domain airsquirrels.com which resolves to the company’s website. As for the Respondent, he registered the squirrels.com domain in 1998 and it resolves to a pay-per-click website featuring links to various other sites that deal with squirrels (the animal) such as “How to Get Rid of Squirrels.” The Complainant had sought out the Respondent and inquired if it would be willing to sell the squirrels.com domain and at what price. The Respondent asked for US$300,000 and the Complainant counter-offered $25,000. When the Respondent rejected this offer, the UDRP complaint was filed.

Complainant claims that Respondent acted in bad faith because he has an active, parked webpage showing sponsored links and he appears to be holding the domain name for the purpose of capitalizing on its value. Essentially, the Complainant asserts that the Respondent acted in bad faith by engaging in the business of owning and selling domain names. The 3-member Panel saw the situation a bit differently.

While it found that the domain is confusingly similar to the SQUIRRELS trademark (a mere threshold test), the Panel went on to find that people “may have a right to register and use a name to attract Internet traffic based on the appeal of a commonly used descriptive phrase, even where the domain name is identical or confusingly similar to the trade mark of a complainant.” In other words, so long as the domain wasn’t registered with a specific brand in mind and the domain was registered for the dictionary meaning of its words, the buying, owning, and selling of domain names is, in fact, a legitimate business.

Finally, the Panel addressed the question of bad faith. It mentioned that prior “UDRP panels have found no bad faith registration where a respondent registered the disputed domain name prior to the time that complainant acquired rights to a mark.” Here, the Respondent owned the domain for 14 years before the Complainant first acquired any rights to its SQUIRREL trademark. However, the Panel gave a glimpse that, were the facts otherwise, it may have adopted a minority view that renewing a domain, to take advantage of its new-found trademark value, can suffice as bad faith registration under the UDRP when it cited the controversial Big 5 decision (which I commented upon in a past blog post.)*

In the end, the Panel did the right thing and held the Complainant guilty of reverse domain name hijacking where the Respondent only used the domain for its generic meaning and owned it for 14 years before the Complainant came on the scene. I fully agree with this ruling since it’s clear that the Complainant brought the UDRP case to apply leverage against the Respondent in its purchase negotiations. As is so often the case, the lesson here is to only hire counsel experienced in domain name disputes since the Complainant here has now wasted its money, gotten a black eye which will hurt it in future enforcement efforts, and I expect the Respondent’s asking price for the squirrels.com domain just went way up….

* However, the Panel later found that “it is therefore implausible that Respondent could have had intent to profit from Complainant’s trademark rights at the time he registered the disputed domain name.” This sentence doesn’t say “registered or renewed” and so suggests that the word “registered” means only the initial act of creating the domain which I feel is inconsistent with the Big 5 decision.”

As we all know by now, new generic top-level domains (gTLDs) have been rolling out and will continue to do so for the next year or so.  As expected, the availability of so many new gTLDs has made fertile ground for cybersquatters and has caused trademark owners to put domain name enforcement higher up on their list of brand protection priorities.

Also, there are some new tools available to help brand owners in their efforts such as the Uniform Rapid Suspension system (URS) which can freeze an infringing domain and take down its website, and the Trademark Clearinghouse (TMCH) which can provide notices to would-be domain registrants when the name they’ve selected includes the trademark of a brand that’s been recorded with the TMCH.

This recent case involving the domain ibm.buzz is not particularly remarkable but it is rather typical of the new generation of cybersquatting scenarios. The domain was registered about four months before the complaint was filed and resolves to a registrar parking page (though when I checked, the page also had pay-per-click links to various computer and software companies). Where the case is rather different from the conventional gTLD dispute is that before the Respondent registered the domain, it was presented with the standard trademark notification from the TMCH explaining that the second-level of the domain contained words or characters which were an exact match for a registered trademark – in this case, IBM. Nevertheless, the Respondent went ahead and registered the domain.

The Panelist noted that “[I]n this case, Respondent’s registration after notification from the Trademark Clearinghouse is indicative of Respondent’s registration in bad faith.” He went on to say that TMCH notification alone typically won’t be enough on which to base a finding of bad faith, and there are cases where a domain applicant might pursue registration notwithstanding the notice – (such as when it is planning to make a fair use of the domain in a fan or criticism website). However, the Panel went on to say that TMCH notification at least shows that the Respondent had clearly been put on notice of the Complainant’s trademark rights and held that “the notification in conjunction with the fame of Complainant’s IBM mark and Respondent’s failure to respond appears to be sufficient to show Respondent’s bad faith registration.”

When the TMCH was first created it was greeted with some skepticism as to whether it would, in fact, deter would-be cybersquatters.  While there have been reports that it has served this function to a significant degree, consideration of the notice in UDRP decisions like this highlight its other function as a tool that may be used as evidence by brand owners when seeking to prove that a domain owner acted in bad faith. For the owners of globally famous brands such as IBM, this may be less of an issue since it can be presumed that registrants know such brands. However, I wonder if evidence of a TMCH notice could tip the balance in a brand owner’s favor where the trademark is less well known or only famous in a limited geographical region.

Though it is not a cure-all and its scope is quite limited, I feel that the cost of TMCH registration may be well worth it if it serves as a tool to help brand owners achieve success in their anti-cybersquatting efforts.