Is MySace.com Worth Twelve Years in Prison?

Things could be about to get real for Filipino cybersquatters. The Filipino Senate recently passed the Cybercrime Prevention Act of 2012. While still awaiting passage in the Filipino House of Representatives, the proposed legislation criminalizes cybersquatting, making it a “punishable act.” Those found guilty could face six to twelve years in prison, a fine of up to 500,000 Philippine pesos (the equivalent of about $11,600), or both.

That’s quite a contrast to the U.S.’s Anti-Cybersquatting Consumer Protection Act (ACPA) of 1999. Although ACPA allows for the awarding of damages between $1,000 and $100,000 for cases involving willful cybersquatting, research by FairWinds in 2008 revealed that courts have rarely assessed damages at the upper end of this range. Accordingly, trademark holders prefer the relative ease and lower cost of recovering cybersquatted domains through the Uniform Domain-Name Dispute-Resolution Policy (UDRP), which only has the power to transfer or cancel domains, and therefore provides little deterrent to cybersquatters. The result? Just about anybody can register a domain that is identical or confusingly similar to a registered trademark with relative impunity.

If the Cybercrime Prevention Act passes, it will be interesting to see what happens to cybersquatting in the Philippines. As for the U.S., I suspect that the risk of twelve years behind bars would be enough to deter all but the boldest of cybersquatters.


Cybersquatting – Not Just for Brands

On January 29, the Coalition Against Domain Name Abuse (CADNA), which FairWinds helped found and runs, hosted a policy forum here in Washington, D.C.  The forum focused on emerging challenges for the Internet community in 2010, specifically the future of ICANN under the Affirmation of Commitments (AOC) and potential reform to the Anti-Cybersquatting Consumer Protection Act.  Attendees heard from two panels regarding these issues, which featured brand owners, online policy experts and Congressional staff members.  The keynote address was given by Senator Stephen Urquhart (R-UT 29th District), the Chairman of the Utah State Senate Transportation and Public Utilities and Technology Committee.  Urquhart recently introduced the E-Commerce Integrity Act to the Utah state legislature. This bill is designed to make the state of Utah more business-friendly by creating greater deterrents to prevent cybersquatting: firstly, the bill raises the damages that can be levied on a cybersquatter, and secondly, it holds affiliates of domain name registrants liable if it is found that they benefit from cybersquatting behavior.

In addition to Sen. Urquhart, representatives of Jay Rockefeller (D-WV), Chairman of the Senate Commerce, Science, and Transportation Committee; and Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee spoke on the panels.  Cybersquatting is an issue that hits close to home for the Senators they work for: PatrickLeahy.com and JohnDRockefeller.com both point to pay-per-click (PPC) sites.  (JayRockefeller.com, however, does lead to the Senator’s Web site.) SteveUrquhart.com also leads to a PPC site.

When discussing the problem of cybersquatting, much of the attention often gets focused on businesses and infringements on brands and trademarks.  However, individuals like politicians and celebrities are also frequently the victims of squatting and other malicious conduct online. It’s great to know that Senator Urquhart and Congressional staff members understand this issue, and we’re happy to have them involved in efforts to create a safe, stable and flourishing Internet.


Bad Intent on Goodwill.com?

Since our report a week ago on the hostess.com decision, a claim under the Anti-Cybersquatting Consumer Protection Act (ACPA) has been filed in the Federal District Court for the Eastern District of Virginia by Goodwill Industries International, Inc. against Cyber2Media, Inc., the owner of the domain goodwill.com.

As with the word “hostess,” the word “goodwill” is arguably a descriptive term.  However, this case is very different from the hostess.com example because the defendant uses goodwill.com to forward visitors to a pay-per-click Web site featuring links to the plaintiff’s site and to other charitable organizations. By using the domain name this way, the defendant appears to be attempting to profit of off Goodwill’s fame as a charitable organization.  By registering goodwill.com and hosting links to charitable organizations, the defendant is likely hoping to take advantage of confused visitors to the site who will assume that the links are approved by Goodwill Industries International. This sort of proof of intent was the missing element in the hostess.com case and seems here to be strong evidence of lack of legitimate use of the domain and the defendant’s registration of the domain in bad faith.

In an interesting side note, the domain savechildren.com was recently ordered to be transferred to the owner of the well-known Save The Children trademark in a UDRP decision which did not make any mention of the potentially descriptive nature of the phrase “save children.” In that case, however, the respondent did not file a response and the domain resolved to a pay-per-click Web site featuring links to complainant’s competitors and other unrelated products and services.


Verizon’s Victory

As we mentioned in our Weekly News Brief, last week, a federal court in California ordered OnlineNIC to pay Verizon $33.15 million in damages for cybersquatting. OnlineNIC, a domain name registrar, had registered over 600 domain names that infringed on the Verizon trademark, which it used to host ad links and pop-under advertisements that earned them revenue. The ruling was initially handed down in December of 2008, but OnlineNIC protested, claiming that the value of the damages [$50,000 per domain] was disproportionate and that only a jury trial could determine what amount of damages would be appropriate. The district court judge rejected both of these claims, and ordered OnlineNIC to pay Verizon’s attorneys’ fees and cost in addition to the $33.15 million in damages.

A law firm that FairWinds has worked with for years once told me that they researched ACPA (Anti-Cybersquatting Consumer Protection Act) damages and found that, on average, judges awarded just $2,000 per domain. That is ridiculous – on a regular basis we find infringing domains that cost our clients well over $100,000 per year. Keep in mind that ACPA provides judges with discretion to award between $1,000 and $100,000 per domain.

The Verizon OnlineNIC ruling represents a huge victory in the ongoing battle against cybersquatters. Sarah Deutsch, Vice President & Associate General Counsel of Verizon and representative in the Coalition Against Domain Name Abuse (CADNA), is a prominent advocate for the elimination of cybersquatting and other abusive practices online. The ruling is great for Verizon and for all companies that have to deal with parasitic infringement. It shows that courts are taking cybersquatting and related offenses seriously, and raises the awareness level of the risks associated with cybersquatting.

However, while this verdict is a bite-back for registrars that allow cybersquatting (which is important – enabling cybersquatting should be punishable just as cybersquatting itself is), it is often difficult to get the cybersquatters themselves. I blogged about this back in December, but there are so few “big-time” cybersquatters who own thousands of names. Most cybersquatters own only a few names, which wouldn’t bring in substantial damages in a court. Given the amount of time and money required to file suit in the U.S. against cybersquatters and how unlikely it is that the damages awarded will be substantial, it often isn’t economically practical to pursue them. As a result brand owners often opt for UDRP, which at best orders a transfer of the domain name to the brand owner—there are no damages awarded through a UDRP.

In order to make the fight against cybersquatting easier, there need to be greater remedies available to trademark holders in the U.S. courts. Raising the threshold of damages would in turn establish more of a deterrent.

In addition, ICANN, as the organization in charge of the domain name system, must provide better guidelines prohibiting infringements and abuses of all kinds. So the question stands – is ICANN going to step up and disaccredit OnlineNic for its activities?


Disorder in the Court

Southern Company (Southern), a Fortune 500 company that provides energy related services in the South, filed for an injunction against Dauben, Inc, a corporation that owns over 600,000 domain names, to suspend its use of the domains sotherncompany.com and southerncopany.com. Southern, which is a Fortune 500 gas & electric utility, had filed a lawsuit against Dauben over the registration and use of sotherncompany.com and southercopany.com—Southern claimed that Dauben was engaged in typosquatting and was therefore in violation of the Anti-Cybersquatting Consumer Protection Act (ACPA).  The district court found that Southern was likely to prevail in its lawsuit and awarded the injunction to prevent any further damage to the company until the matter was officially resolved.

An appeal filed by Dauben, however, vacated the injunction. The appellate court found that the district court was too quick to assume the likelihood of Southern prevailing in its lawsuit against Dauben. Looking to ACPA, the appellate court determined that Dauben may succeed in its defense using the Act’s “fair use” clause and that the district court did not adequately consider how Dauben’s use of the domains caused “irreparable injury” to Southern.

I’m not a trademark lawyer, but in reading the decision, the language that particularly struck me centered around the appellate court’s dismissal of the “irreparable injury” claim. The appellate court stated that the district court inaccurately assessed the confusing similarity of the typo domain names to southerncompany.com and determined that “the likelihood of confusion test in trademark infringement law is different, and more comprehensive, than the test for ‘confusingly similar’ under ACPA.”

CADNA has been pushing for a more comprehensive ACPA for years now. In order for ACPA to be an effective piece of legislation—in other words, a piece of legislation that creates a deterrent against cybersquatting, which is what it was intended to do when it was passed a decade ago—it needs to be brought up to date. Cybersquatting techniques have evolved and continue to evolve; we need ACPA to evolve along with them or else cybersquatters will continue to find loopholes to avoid accountability.