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AntiCybersquatting Consumer Protection Act

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On-line extortion in any form is unacceptable and outrageous. Whether it's people extorting companies by registering company names, misdirecting Internet users to inappropriate sites, or otherwise attempting to damage a trademark that a business has spent decades building into a recognizable brand, anyone engaging in cyber-squatting activity should be held accountable for their actions. --Sen. Abraham, Sponsor of the ACPA
"Cybersquatting is the Internet version of an unlawful land grab. Cybersquatters register well-known brand names as Internet domain names in order to force the rightful owners of the marks to come forward and pay for the right to engage in electronic commerce under their own name." Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 946 (9th Cir. 2002) .

In the late 1990s, in the cacophony of disagreement over domain names and Internet governance, there was one issue over which there was rough consensus: cybersquatters bad! Back in the late 1990s, the White House DNS White Paper singled out cybersquatting as a problem; Federal Courts had perpetual disdain for Cybersquatters; and the 106th Congress, a gridlocked Congress, found rough consensus to pass the AntiCybersquatting Consumer Protection Act (ACPA).

Background

"The purpose of the bill is to protect consumers and American businesses, to promote the growth of online commerce, and to provide clarity in the law for trademark owners by prohibiting the bad-faith and abusive registration of distinctive marks as Internet domain names with the intent to profit from the goodwill associated with such marks-a practice commonly referred to as ''cybersquatting.'" [Senate Report Leg His] [Sporty's Farm L.L.C. v. Sportsman's Mkt., Inc., 202 F.3d 489, 495 (2d Cir. 2000) (quoting S. Rep. No. 106-140, at 4 (1999))]

"The ACPA was enacted in 1999 in response to concerns over the proliferation of cybersquatting - the Internet version of a land grab." [Southern Grouts 1246 11th Cir 2009] [Coca Cola 778 8th Cir. 2004] [Interstellar Starship 946 9th Cir. 2002] [Virtual Works 267 4th Cir 2001]

"It was enacted because then-existing law did not expressly prohibit the practice of cybersquatting, and cybersquatters had begun to insulate themselves from liability under the Federal Trademark Dilution Act." [Clearly 1263 DCO 2009 (citing Virtual Works 267 4th Cir 2001)] [Shields 481 3rd Cir 2001 ( the ACPA "was intended to prevent `cybersquatting,' an expression that has come to mean the bad faith, abusive registration and use of the distinctive trademarks of others as Internet domain names.'" )]

""The paradigmatic harm that the ACPA was enacted to eradicate [was] the practice of cybersquatters registering several hundred domain names in an effort to sell them to the legitimate owners of the mark." [Lucas p 810 6th Cir. 2004]

In the Senate Report accompanying the ACPA, cybersquatters are defined as those who: (1) "register well-known brand names as Internet domain names in order to extract payment from the rightful owners of the marks;" (2) "register well-known marks as domain names and warehouse those marks with the hope of selling them to the highest bidder;" (3) "register well-known marks to prey on consumer confusion by misusing the domain name to divert customers from the mark owner's site to the cybersquatter's own site;" (4) "target distinctive marks to defraud consumers, including to engage in counterfeiting activities." S. Rep. No. 106-140, at 5-6 (1999) (Conf. Rep.).

In its report on the ACPA, the Senate Judiciary Committee distilled the crucial elements of bad faith to mean an "intent to trade on the goodwill of another's mark." S. Rep. No. 106-140, at 9 (1999) (Conf. Rep.). [Lucas p 810 6th Cir. 2004] [Ford Motor Co. v. Catalanotte, 342 F.3d 543, 549 (6th Cir.2003) ("Registering a famous trademark as a domain name and then offering it for sale to the trademark owner is exactly the wrong Congress intended to remedy when it passed the ACPA.")] [Virtual Works. 267 4th Cir. 2001 (Cybersquatting refers to the "`deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners.'" The practice of cybersquatting occurs when a person registers "`well-known brand names as Internet domain names' in order to force the rightful owners of the marks `to pay for the right to engage in electronic commerce under their own brand name.'" quoting S.Rep. No. 106-140, at 4 (1999))] [Clearly 1264 DCO 2009] [Lewittes SDNY 2004 ("In short it is, as titled, a law designed to combat cybersquatting.")] [Pinehurst 427 MDNC 2003]

"The legislative history of the ACPA includes findings that cybersquatters were engaging in consumer fraud and creating public confusion as to the true source or sponsorship of goods and services in a way that would impair electronic commerce, deprive trademark owners of substantial revenues and consumer goodwill, and place overwhelming burdens on trademark owners in protecting their valuable intellectual property. S.Rep. No. 106-140, at *2 (findings)." [Coca Cola 778 8th Cir. 2004]

But note that courts have concluded "that the words of the statute are broader than this political stimulus that led to its enactment." [DSPT p 7 9th Cir 2010] [Bosley p 680-81 9th Cir. 2005] Of course, given that bad faith is a criteria for the cause of action, and the elements of bad faith are left to be applied at the discretion of the court, the broadening of the statute beyond congressional intent could only take place where a court interprets bad faith broader than the cybersquatting Congress intended to redress.

Derived From: The AntiCybersquatting Consumer Protection ActPDF, Report 106-140, 106 th Cong., 1st Sess. (Aug. 5, 1999) (Legislative History)

Trademark owners are facing a new form of piracy on the Internet caused by acts of ''cybersquatting,'' which refers to the deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners. For example, when Mobil and Exxon announced their proposed merger in December, 1998, a speculator registered every variation of the possible resulting domain name, i.e., mobil-exxon.com, exxon-mobil.com, mobilexxon.com, etc., ad infinitum. In another example of bad-faith abuses of the domain name registration system, Network Solutions- the domain name registry that administers the Internet's ''.com,'' ''.net,'' ''.org,'' and ''.edu'' top level domains-pulled on a London computer club in May, 1999, that had registered over 75,000 domain names using an automated computer program.1 Their aim was to lock up all available four letter domains by systematically reserving every possible combination of letters, starting with aaaa.com, then aaab.com, aaac.com, up to zzzz.com, until every available combination had been reserved.

The practice of cybersquatting harms consumers, electronic commerce, and the goodwill equity of valuable U.S. brand names, upon which consumers increasingly rely to locate the true source of genuine goods and services on the Internet. Online consumers have a difficult time distinguishing a genuine site from a pirate site, given that often the only indications of source and authenticity of the site, or the goods and services made available thereon, are the graphical interface on the site itself and the Internet address at which it resides. As a result, consumers have come to rely heavily on familiar brand names when engaging in online commerce. But if someone is operating a web site under another brand owner's trademark, such as a site called ''cocacola.com'' or ''levis.com,'' consumers bear a significant risk of being deceived and defrauded, or at a minimum, confused. The costs associated with these risks are increasingly burdensome as more people begin selling pharmaceuticals, financial services, and even groceries over the Internet. Regardless of what is being sold, the result of online brand name abuse, as with other forms of trademark violations, is the erosion of consumer confidence in brand name identifiers and in electronic commerce generally.

Cybersquatters target distinctive marks for a variety of reasons. Some register well-known brand names as Internet domain names in order to extract payment from the rightful owners of the marks, who find their trademarks ''locked up'' and are forced to pay for the right to engage in electronic commerce under their own brand name. For example, several years ago a small Canadian company with a single shareholder and a couple of dozen domain names demanded that Umbro International, Inc., which markets and distributes soccer equipment, pay $50,000 to its sole shareholder, $50,000 to an Internet charity, and provide a free lifetime supply of soccer equipment in order for it to relinquish the ''umbro.com'' name. The Committee also heard testimony that Warner Bros. was reportedly asked to pay $350,000 for the rights to the names ''warnerrecords. com'', ''warner-bros-records.com'', ''warner-pictures.com'', ''warner-bros-pictures'', and ''warnerpictures.com''.

Others register well-known marks as domain names and warehouse those marks with the hope of selling them to the highest bidder, whether it be the trademark owner or someone else. For example, the Committee heard testimony regarding an Australian company operating on the Internet under the name ''The Best Domains,'' which was offering such domain names as ''911porsche.com,'' at asking prices of up to $60,911, with a caption that reads ''PORSCHE: DO I NEED TO SAY ANYTHING?'' The Committee also heard testimony regarding a similarly enterprising cybersquatter whose partial inventory of domain names-the listing of which was limited by the fact that Network Solutions will only display the first 50 records of a given registrant-includes names such as Coca-Cola, Pepsi, Burger King, KFC, McDonalds, Subway, Taco Bell, Wendy's, BMW, Chrysler, Dodge, General Motors, Honda, Hyundai, Jaguar, Mazda, Mercedes, Nissan, Porsche, Rolls-Royce, Saab, Saturn, Toyota, and Volvo, all of which are available to the highest bidder through an online offer sheet.

In addition, cybersquatters often register well-known marks to prey on consumer confusion by misusing the domain name to divert customers from the mark owner's site to the cybersquatter's own site, many of which are pornography sites that derive advertising revenue based on the number of visits, or ''hits,'' the site receives. For example, the Committee was informed of a parent whose child mistakenly typed in the domain name for ''dosney.com,'' expecting to access the family-oriented content of the Walt Disney home page, only to end up staring at a screen of hardcore pornography because a cybersquatter had registered that domain name in anticipation that consumers would make that exact mistake. Other instances of diverting unsuspecting consumers to pornographic web sites involve malicious attempts to tarnish a trademark owner's mark or to extort money from the trademark owner, such as the case where a cybersquatter placed pornographic images of celebrities on a site under the name ''pentium3.com'' and announced that it would sell the domain name to the highest bidder. Others attempt to divert unsuspecting consumers to their sites in order to engage in unfair competition. For example, the business operating under the domain name ''disneytransportation.com'' greets online consumers at its site with a picture of Mickey Mouse and offers shuttle services in the Orlando area and reservations at Disney hotels, although the company is in no way affiliated with the Walt Disney Company and such fact is not clearly indicated on the site. Similarly, the domain name address ''wwwcarpoint.com,'' without a period following ''www'', was used by a cybersquatter to offer a competing service to Microsoft's popular Carpoint car buying service.

Finally, and most importantly, cybersquatters target distinctive marks to defraud consumers, including to engage in counterfeiting activities. For example, the Committee heard testimony regarding a cybersquatter who registered the domain names ''attphonecard.com'' and ''attcallingcard.com'' and used those names to establish sites purporting to sell calling cards and soliciting personally identifying information, including credit card numbers. We also heard the account of a cybersquatter purporting to sell Dell Computer products under the name ''dellspares.com'', when in fact Dell does not authorize online resellers to market its products, and a similar account of someone using the name ''levis501warehouse.com'' to sell Levis jeans despite the fact that Levis is the only authorized online reseller of its jeans.8 Of even greater concern was the example of an online drug store selling pharmaceuticals under the name ''propeciasales.com'' without any way for online consumers to tell whether what they are buying is a legitimate product, a placebo, or a dangerous counterfeit.

The ACPA was a Narrow Targeted Remedy

"The legislative history corroborates the Court's conclusion that genuine cyber-gripers like Defendant are not covered by the ACPA. The ACPA's congressional record consistently signals the drafters' intention to target a narrow class of cyber-squatters consisting of those who have the bad faith intent to profit, and not to tread on the rights of those with any other motives. H.R. Rep. 106-412, 10; S. Rep. 106-40, 13; Ford Motor Co., 177 F. Supp.2d at 642 (the "ACPA was designed to target persons who commandeer a domain name for no reason other than to profit by extortion, yet bypass persons with legitimate interests in the domain name.") The bad-faith statutory factors were designed specifically to "balance the property interests of trademark owners with the legitimate interests of Internet users and others who seek to make lawful uses of others' marks, including for purposes such as comparative advertising, comment, criticism, parody, news reporting, fair use etc." H.R. Rep. 106-412, 10 (emphasis added). "[N]oncommercial uses of a mark, such as for comment, criticism, parody, news reporting, etc .... are beyond the scope of the 371 *371 bill's prohibitions." S. Rep. 106-40, 9 (emphasis added). "Under the bill, the use of a domain name for purposes of comparative advertising, comment, criticism, parody, news reporting, etc., even where done for profit, would not alone satisfy the bad-faith intent requirement." S.Rep. 106-140, 14; H.R. Rep. 106-412, 11 (emphasis added)."

- Mayflower Transit, LLC v. Prince, 314 F. Supp. 2d 362, 370-71- Dist. Court, D. New Jersey 2004

Koch Industries, Inc. v. DOES , Dist. Court, D. Utah 2011 (citing Mayflower ).

Why ACPA Needed; Existing Legal Remedies Insufficient

Congress viewed the legal remedies available for trademark owners before the passage of the ACPA as "expensive and uncertain." The ACPA was designed to thwart cybersquatters "who register numerous domain names containing American trademarks or tradenames only to hold them ransom in exchange for money." [Virtual Works Sec. II.A.1 ("The ACPA was enacted in 1999 in response to concerns over the proliferation of cybersquatting-the Internet version of a land grab.")]

Existing legal remedies were insufficient to respond to the problem of cybersquatting. [Senate Hearing 1999 (Statement of Anne Chasser, President, International Trademark Association, " remedies under traditional trademark law cannot deal adequately with the number of instances of cybersquatting. For example, existing law does not deal with cases where cybersquatters are warehousing domain names, essentially holding an inventory of trademarks that he won't use but intends to sell to the rightful owner at extortionate prices. There are also recent cases where there is no one to initiate legal action against because cybersquatters have given false or misleading contact information to the registration authority.") [Ward 223 2001 ( "Congress essentially codified existing actions against cybersquatters while attempting to fill any perceived holes left uncovered by infringement and dilution actions. Specifically, Congress noted that with the development of case law extending infringement and dilution actions to include domain name violations, cybersquatters had become increasingly clever in their tactics. Infringement was easily circumvented by either not linking a web site to the domain name or by posting a site that was unrelated to the trademark owner's business. Likewise, a dilution claim could be prevented by avoiding making initial offers of sale to the legitimate trademark owners, thus defeating the courts' lines of precedent construing offers to sell domain names as a form of use in commerce.")]

According to the Senate Testimony of Anne Chasser in 1999,

Despite the problems it presents to trademark owners and consumers, cybersquatting, 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 some 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, Panavision Int'l, L.P. v. Toeppen, 945 F. Supp. 1296 (C.D. Cal. 1996) (Defendant's attempt to arbitrage the panavision.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 famous trademarks in bulk, 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 not to offer the domain name for sale in any manner that could result in liability under current case law. (See, Juno Online Services v. Juno Lighting, Inc., 979 F. Supp. 684 (N.D. Ill. 1997) (mere registration of a domain name is not trademark infringement or misuse even if the use of another's trademark is deliberate)). [Senate Hearing 1999 (Statement of Anne Chasser, President, International Trademark Association)]

Sen. Leahy

" The Federal Trademark Dilution Act of 1995 has been used as I predicted to help stop misleading uses of trademarks as domain names. One court has described this exercise by saying that ``attempting to apply established trademark law in the fast-developing world of the Internet is somewhat like trying to board a moving bus * * *'' [Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997)] Nevertheless, the courts appear to be handling ``cybersquatting'' cases well. As Professor Michael Froomkin notes in his written testimony, ``[i]n every case involving a person who registered large numbers of domains for resale, the cybersquatter has lost.'' " [Senate Hearing 1999 (Sen. Leahy )]

In Rem Cases:

"For many trademark owners, the lack of clear anti-cybersquatting mechanisms have left them without adequate and effective judicial remedies. Even though cybersquatters are trafficking in domain names, trademark owners in many cases cannot sue without proof of use or an offer of sale or because in rem actions against domain names are not permitted. Consequently, trademark owners are forced to engage in a continual monitoring program--waiting to see if the cybersquatter begins to use their domain name, offers it for sale to the public, provides legitimate contact information to the registration authority, or fails to renew the registration with the registration authority." [Senate Hearing 1999 (Statement of Anne Chasser, President, International Trademark Association)] See also [Ward 225 (Cybersquatters have been able to elude suit by hiding behind misleading information provided to the domain name registrar or locating themselves offshore to evade or escape suit due to a lack of personal jurisdiction. In one case involving 128 domain names, the plaintiff observed, and the court agreed, that "some of the domain names at issue have registrants whose identities and addresses are unknown and against who in personam proceedings might be fruitless.")]

Porsche Cars North America, Inc. and Dr. Ing. H.C.F. Porsche A.G. v. Porsch.com. et. al., 1999 WL 378360 (E.D. Va.) (the court said that the Trademark Dilution Act cannot be read to permit in rem actions)

Definitions

Cybersquatter

Congress defined nefarious cybersquatters as

those who: (1) “register well-known brand names as Internet domain names in order to extract payment from the rightful owners of the marks;” (2) “register well-known marks as domain names and warehouse those marks with the hope of selling them to the highest bidder;” (3) “register well-known marks to prey on consumer confusion by misusing the domain name to divert customers from the mark owner’s site to the cybersquatter’s own site;” (4) “target distinctive marks to defraud consumers, including to engage in counterfeiting activities.” S. REP. NO. 106-140 at 5-6. [Lucas]

At a 1999 Senate Hearing, Sen. Abraham stated

We are here today to hear evidence on a new form of high- tech fraud that is causing confusion and inconvenience for consumers, increasing costs for people doing business on the Internet, and posting substantial threat to a century of pre- Internet American business efforts. The fraud is commonly called ``cybersquatting,'' a practice whereby individuals, in bad faith, reserve Internet domain names or other identifiers of online locations that are similar to or identical to trademarked names. Once a trademark is registered as an online identifier or domain name, the cybersquatter can engage in a variety of nefarious activities--from the relatively benign parody of a business or individual, to the obscene prank of redirecting an unsuspecting consumer to pornographic content, to the destructive worldwide slander of a centuries-old brand name. [Senate Hearing 1999]

Sen. Hatch described it as follows:

"For the Net-savy, what we are talking about is ``cybersquatting,'' of the deliberation, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners. " [Senate Hearing 1999]

In the legislative history, cybersquatting is described as a "nefarious" activity, an fraudulent activity, and as a get-rich scheme.

" That is what cybersquatting is all about--getting rich quick off of the hard work and investment of trademark owners, and in the words of one intellectual property attorney, the practice is ``just exploding.'' " [Senate Hearing 1999] (Statement of Anne H. Chasser)]

" Once a trademark is registered as an online identifier or domain name, the cybersquatter can engage in a variety of nefarious activities--from the relatively benign parody of a business or individual, to the obscene prank of redirecting an unsuspecting consumer to pornographic content, to the destructive worldwide slander of a centuries-old brand name." [Senate Hearing 1999] (Statement of Sen. Abraham)]

" r imagine logging on to what you is your favorite online retailer only to find out later that the site was not that retailer at all, but rather a facade for an unscrupulous individual who is collecting your credit card and other personal information for unknown and possibly nefarious purposes." [Senate Hearing 1999] (Statement of Sen. Hatch)]

Prior to the enactment of the ACPA, the first definition of cybersquatters in the federal courts was articulated by the Norther District of Illinois:

"Toeppen is what is commonly referred to as a cyber-squatter.  Miller, Cyber Squatters Give Carl's Jr., Others Net Loss, Los Angeles Times,  1996 WL 11004750. These individuals attempt to profit from the Internet by reserving and later reselling or licensing domain names back to the companies that spent millions of dollars developing the goodwill of the trademark." [Intermatic 1233 NDIll]

"'The most well-know cases to date involve famous cybersquatter Dennis Toeppen, who registered as domain names the trademarks of over 100 major corporations. Toeppen successfully sold these pirated domain names to some companies for as much as $15,000.' Perkins Cole LLP, Trademarks and the Internet" [Intermatic n. 30 NDIll]

The 6th Circuit defined Cybersquatting as follows

"As the district court noted, "cybersquatting" occurs when a person other than the trademark holder registers the domain name of a well known trademark and then attempts to profit from this by either ransoming the domain name back to the trademark holder or by using the domain name to divert business from the trademark holder to the domain name holder. See Sporty's Farm L.L.C. v. Sportsman's Market, Inc., 202 F.3d 489 493 (2d Cir.2000)." [DaimlerChrysler 204 6th Cir. 2004]

Prior to the passage of the ACPA, courts referred to cybersquatters as those who warehoused domain names and then sold them at extortion prices. See, Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227 (N.D. Ill. 1996) (referring to the defendant as a ``cybersquatter'') [Senate Hearing 1999] (Statement of Anne H. Chasser, "Early cases include Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227 (N.D. Ill. 1996) in which the term ``cybersquatter'' was coined. In that particular case, the defendant registered intermatic.com based on the plaintiff's registered trademark for INTERMATIC. The defendant, in addition to this domain registration, also had registered approximately 240 other domain names, many based on trademarks of well-known businesses, including deltaairlines.com, eddiebauer.com and neiman-marcus.com. ")

Domain Name

The term 'domain name' means any alphanumeric designation which is registered with or assigned by any domain name registrar, domain name registry, or other domain name registration authority as part of an electronic address on the Internet. 15 U.S.C. § 1127.

Constitutionality

Numerous cases have upheld the constitutionality of the ACPA and its remedies

ICANN UDRP

A small collection of cases have considered the relationship of ICANN's UDRP with the ACPA.Federal courts have concluded that UDRP decisions are not binding on them. UDRP does not constitute binding arbitration under the Federal Arbitration Act. Judicial review of a WIPO decision is de novo.

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