As businesses realize that the Internet is the wave of the future, many are rushing to catch that wave by establishing a domain name for a presence in cyberspace. As domain names have proliferated so have disputes between parties laying claim to the same or similar domain names.

In 1998, the federal government created the Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit organization designed to take charge of the domain system this year. A new Uniform Domain Name Dispute Resolution Policy approved by ICANN is now in effect. The policy, which is incorporated into agreements for registration of domain names, provides for mandatory administrative proceedings when a complaining party claims: (1) that a domain name is identical or confusingly similar to a trademark or service mark in which the complaining party has rights; (2) that the party named in the complaint has no rights or legitimate interests in the name; and (3) that the party named in the complaint registered the name and is using it in bad faith. The matter can also be taken to court for an independent resolution either before or after the administrative proceeding. After a decision by a court or administrative panel, the domain name may be canceled, transferred, or changed according to the resolution of the dispute.

In a recent federal case, Epix, a maker of video-imaging hardware and software, complained when another company, ISS, set up a web page at "epix.com." "EPIX" was a valid trademark belonging to Epix. The court held that Epix would have to show under settled law on trademark infringement that ISS was using a mark that was confusingly similar to Epix's valid trademark. Two points clearly favoring Epix were that the terms at issue were virtually identical and that Epix and ISS both used the Internet for marketing. The only factor clearly favoring ISS was that Epix's sophisticated industry and academic customers were not likely to be easily confused, even though the products and services of ISS and Epix overlapped. The court found that there was enough conflicting evidence to require a factfinder (a judge or jury) to decide the matter.

The lack of significant regulatory control over domain name registration in the early years of Internet commerce has generated a phenomenon known as "cybersquatting." Cybersquatting is the registration of a domain name of a well-known trademark by someone who does not hold the trademark and who then typically tries to sell the domain name to the trademark owner. This practice reached such proportions that Congress recently passed the Anticybersquatting Consumer Protection Act (ACPA). Before the ACPA was enacted, protection of trademarks from cybersquatters under general trademark law was uneven at best, creating confusion for consumers and trademark owners alike. The new law creates a federal remedy tailored to this specific problem.

A federal appeals court recently handed down the first appellate decision under the ACPA. Sportsman's Market, Inc., a nationwide mail-order catalog company specializing in items for pilots and aviation enthusiasts, has long owned the registered trademark "sporty's," using it on its catalog covers, in its toll-free numbers, and in millions of dollars worth of advertising. Owners of a mail-order catalog selling items unrelated to aviation planned to enter the aviation catalog business, forming a wholly owned subsidiary for that purpose. The owners, one of whom was on the Sportsman's Market's mailing list, registered the domain name "sportys.com" and sold it to another subsidiary called "Sporty's Farm," that grows and sells Christmas trees. When Sporty's Farm began advertising by means of a sportys.com website, Sportsman's Market asked a federal court to intervene.

The court applied the ACPA. It found that "sporty's" was a distinctive mark entitled to protection under the ACPA, and that the domain name "sportys.com" was certainly confusingly similar to the protected trademark. It also found that the evidence showed that Sporty's Farm acted with a "bad-faith intent to profit" from the mark when it registered its domain name.

The ACPA lists nine criteria to consider when looking for bad-faith intent, but the list is not exhaustive. In this case, the most important criterion was that the owners of Sporty's Farm, while knowing about Sportsman's Market's distinctive trademark and planning to compete head-to-head with Sportsman's Market, registered a nearly identical domain name for the primary purpose of keeping Sportsman's Market from using that domain name. The court ordered Sporty's Farm to release its interest in sportys.com and to transfer the name to Sportsman's Market. It also prohibited Sporty's Farm from doing anything to hinder Sportsman's Market from obtaining the disputed domain name.

from Report From Counsel newsletter, Summer 2000

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