The Brave New World of Policing By Patrick M. Fahey and Susan S. Murphy

t’s a brave new world for when the entity tasked with coordination ber of registrars and individuals register owners. By some accounts, “virtu- of the Internet system, the millions of domain names on a daily basis Ially every typographical error and Internet Corporation for Assigned Names that often include brands and typographi- misspelling of a word is monetized by and Numbers (ICANN), implemented the cal errors of brands en masse and free of someone, whether a domain name regis- “Add Grace Period” (AGP), a five-day charge by exploiting the five-day AGP.”8 trar, a domain investor, [or] an ISP. . . .”1 grace period during which Whether viewed as legitimate or nefar- Trademark owners spend millions of dol- ious, the instances of have lars in promoting their marks and taking all the new owner [of a domain name] increased exponentially over the course of reasonable steps to protect that investment. can make full use of the chosen the past three years.9 Several factors are On any given day, however, hundreds or domain name, and no one else can responsible for this. First, the ease with even thousands of permutations of those use that domain name as the address which available domain names can be marks are popping up in domain names on for a website. However, during the identified and registered using automated the Internet, leading customers to websites AGP, the new owner can drop the processes, sometimes referred to as “drop- populated with links to the legitimate mark domain name for any reason, with- catching,” allows for the bulk registration holder’s competitors. By the time the mark out charge. If the new owner does of thousands of domain names at a time.10 owner tracks down who has registered not drop the name by the end of the Second, domain tasting has exploded due those domains—to the extent that informa- AGP, it must pay the registration to the ease with which the tasted domains tion can be determined—the registrations fee for that domain name.4 can be monetized and analyzed for profit- have changed hands. ability quickly and in bulk.11 Finally, the “Domain tasting,” the practice of reg- The implementation of the AGP, which practice of domain tasting, when done istering and monetizing a domain name was meant to protect registrars and regis- on a large enough scale, has proven to be and dropping that registration if it proves trants from mistakes and fraud in the reg- extraordinarily lucrative.12 unprofitable, is being fueled by a five-day istration process, has led to the unintended Unsurprisingly, the most lucrative grace period during which unprofitable consequence of domain tasting.5 domain names tend to be those that are domains can be dropped free of charge, According to the World Intellectual the most similar to known trademarks. and the availability of automated systems Property Organization (WIPO), domain The amount of money at stake has led that can identify, register, and gauge traf- name tasting is to an increase in a particular form of fic on the sites in bulk. This practice has —“”—a proven enormously lucrative for domain a practice in which a person or practice that takes advantage of those name owners, but it has placed some entity (who may be affiliated with a Internet users who eschew search engines trademark owners on a virtual merry-go- registrar) registers a domain name for direct navigation, or typing a domain round of abuse. for a five-day grace period without name directly into their web browser’s Mark owners recently have scored a payment of the registration fee, and address bar.13 This practice, which capi- victory in the fight against the ill effects parks it on a pay-per-click website talizes on trademark owners’ goodwill, of domain tasting, but not a complete monitored for revenue, whereupon is harmful and costly for mark owners victory. In Verizon California, Inc. v. the name is dropped or re-registered because it diverts traffic intended for their Navigation Catalyst Systems, Inc.,2 the by a new registrant, thereby start- websites and confuses consumers.14 Worse United States District Court for the ing a new grace period. Only those yet, the traditional tools available to com- Central District of California concluded domain names generating significant bat cybersquatters leave trademark owners that the tasting of domain names that traffic are permanently registered.6 ill-equipped to deal with the new world of are confusingly similar to a trade- domain tasting. mark violates the Anticybersquatting To some, domain tasting is a legitimate Consumer Protection Act. At the same business model. Others view the practice The Old World Tools for Combating time, however, the court declined to as undesirable—even where the rights Cybersquatting Prove Ineffective enjoin the use of an automated search of trademark owners are not impacted. Trademark owners seeking to put a stop and registration process, even where These critics point out that tasting lim- to the use of domain names that are the plaintiffs claimed that such process its the availability of domain names for confusingly similar to their marks have is “uncontrolled and ineffective” in registration and leads to a proliferation two principal tools at their disposal: the preventing the registration of infringing of low-quality websites that have no pur- arbitration-based Uniform Domain Name domain names.3 pose other than to host advertisements.7 Dispute Resolution Policy (UDRP), Particularly troubling to trademark owners and the civil remedy afforded by the The New World of Domain Tasting is “abusive domain tasting,” defined as “a Anticybersquatting Consumer Protection It began innocently enough in 2001, practice whereby a relatively small num- Act (ACPA).

Published in Intellectual Property Litigation, Volume 20, Number 2, Winter 2009 © 2009 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof • 1 may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The UDRP, implemented by ICANN, in Verizon California, Inc. has made it • after using the confusingly similar is meant to provide a “quick, cost effective easier for trademark owners to take on domains to generate revenues, deleted dispute resolution procedure” for domain domain tasters. It appears, however, that many of them during the AGP in name disputes.15 The ACPA was enacted the decision will do little to put an end to order to receive a full refund of their “in response to concerns over the prolif- the practice of domain tasting or the harm registration costs21 eration of cybersquatting—the Internet being suffered by trademark owners as a version of a land grab.”16 Both provide a result of that practice. Plaintiffs sought, among other things, pre- means by which trademark owners can liminary injunctive relief, enjoining defen- combat bad-faith use of domain names that Verizon California, Inc. v. dants from using or registering domain are confusingly similar to their marks. Both Navigation Catalyst Systems, Inc. names that were confusingly similar to the have proven inefficient, however, in com- In April 2008, three affiliates of Verizon plaintiffs’ trademarks and from continuing bating domain tasting. Communications, Inc. and owners of cer- to use an automated process to register In the light of the use of automated tain of the Verizon trademarks brought domain names.22 With regard to the use systems to register hundreds of thousands suit in the United States District Court of automated processes to register domain of domain names a day, the sheer scope of for the Central District of California names, the plaintiffs asserted that: the infringement makes any enforcement against an ICANN accredited registrar procedure cost prohibitive, whether it be Basic Fusion, Inc. (Basic Fusion) and its Defendants’ large-scale cybersquat- by arbitration or court action.17 Moreover, affiliate Navigation Catalyst Systems, Inc. ting business is unrestrained and these bulk registrations are often anony- (Navigation Catalyst). Basic Fusion “spe- fueled by Defendants’ continued use mous and, because the domains are tasted cializes in ‘bulk registrations,’ providing of an automated process to locate for less than five days at a time, the services to those customers seeking to those domain names that gener- infringing domain names are a moving register large numbers of domain names.” ate traffic. Defendants’ automated target.18 By the time a mark holder can Navigation Catalyst, in addition to being process, however, is fundamentally identify an infringing domain and ascer- an affiliate of Basic Fusion, is a Basic flawed. Having registered over 15 tain the registrant’s identity, the mark has Fusion customer, using an automated thousand domain names that are often changed hands, leading the mark system to identify and register with Basic confusingly similar to famous or owner repeatedly back to square one. Fusion hundreds of thousands of domain distinctive marks, Defendants must The goals of the ACPA seem to con- names.20 be aware that their automated pro- template affording protection to the mark Plaintiffs asserted six causes of action cess may occasion infringement owner from this dilemma. At least with against Basic Fusion and Navigation liability. Nonetheless, Defendants respect to in rem actions, the act expressly Catalyst. One was a cause of action for continue to register domain names provides that the registrar or registry “not cybersquatting in violation of the ACPA. confusingly similar to . . . Plaintiffs’ transfer, suspend, or otherwise modify the In support of this cause of action, plain- marks and other famous and dis- domain name during the pendency of [an] tiffs claimed that defendants tinctive marks. Unless a broad action. . . .”19 However, this provision is injunction issues, Defendants will largely ineffective and even the institution • have registered and used over three continue to use their automated pro- of a lawsuit often is not enough to prevent million domain names using an auto- cess to register confusingly similar transfer of an infringing domain. This mated process, “targeting nearly every domain names and harm Plaintiffs requirement of the ACPA is often ignored single famous trademark in existence” and the public. On the other hand, by non-U.S. registrars (presumably on the • have registered almost 1,400 domain granting an injunction will only pre- basis that they are not governed by U.S. names that were confusingly similar vent Defendants from profiting its law). Moreover, at least one U.S.-based to the Verizon marks [sic] illegal behavior, which is not a registry has taken the position that it does • have registered thousands more cognizable “hardship” that this court not have the ability to comply with this domains that were confusingly similar should consider.23 aspect of the act. to other famous marks unrelated to the Accordingly, the identity of the plaintiffs in this action Defendants did not deny engaging in infringer is a moving target, not only • monetized the confusingly similar domain name tasting, but rather claimed while the mark owner struggles to iden- domain names, that is, defendants that they use the AGP not only to deter- tify a proper defendant, but also after suit “operate websites at each of the mine which of the domains will gener- has been brought. And the infringement Confusingly Similar Domain Names ate revenue, but also to screen out those continues through it all. Along with the which display . . . links featuring domains that present a “potential trade- more nebulous dilutive effect on the rights goods or services that are directly mark conflict.” According to the defen- of the mark owner, these confusingly competitive with those sold or pro- dants, because of that screening proce- similar domain names continue to divert vided in connection with the distinc- dure, “[d]omain names that matched char- traffic from the mark owner’s website to tive or famous marks,” and each time acter-strings on a black-list, or identified websites populated with links to the mark an Internet user clicks on one of those as trademarks by human screeners, were owner’s competitors, causing incalculable links, defendants received payments deleted prior to the expiration of the five harm to the mark owner’s goodwill. from “one or more advertisers, search day Add Grace Period.” 24 Interestingly, The decision of the District Court engines, or affiliate programs” in asserting that “potentially infringing

2 • Published in Intellectual Property Litigation, Volume 20, Number 2, Winter 2009 © 2009 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. domain names were deleted for compli- “potentially diverting consumers who in a permissible fashion.”33 Accordingly, ance purposes, not . . . because they did would otherwise have purchased goods the court denied plaintiffs’ request for not generate revenue,” defendants aptly or services from Plaintiffs away from an injunction with regard to defendants’ demonstrated the significant revenues that Plaintiffs”; and (3) the fact that the defen- ongoing use of automated registration can be derived from the act of domain dants had clearly “acquired thousands of processes. tasting itself.25 Similarly, defendants did domain names that were confusingly simi- not deny that they “reserved” the domain lar to any number of famous marks.”30 The Implications for Trademark Owners names at issue, but claimed instead that Importantly, the court concluded that The court’s order on plaintiffs’ motion for most of those names were dropped dur- the plaintiffs had established irreparable preliminary injunction can be viewed both ing the AGP, during which the defendants harm resulting from the defendants’ as a victory and as a defeat for trademark performed their “trademark scrubbing domain tasting. owners in their fight against infringing procedures.”26 Defendants stressed, more- domain tasting. over, the recent improvements to their Since the filing of the complaint, In recognizing that the tasting of con- screening procedures both with regard to Defendants have continued to fusingly similar domains constitutes bad- the plaintiffs’ marks and generally.27 acquire new domain names that are faith registration and use in violation of In opposing plaintiffs’ motion for pre- confusingly similar to Plaintiffs’ the ACPA, and recognizing the harm to liminary injunction, defendants asserted, marks. Even if they are able to iden- trademark owners in having confusingly among other things, that plaintiffs were tify and cancel all of those names similar domains monetized (even for short not able to establish a likelihood of suc- within the Add Grace Period, there periods), the court gave mark owners a cess on the merits of their ACPA claim is nonetheless a period of several significant victory over domain tasters. because (1) domain tasting does not con- days for each domain name when Moreover, the court made clear that it is stitute “registration” of a domain name Defendants use that name to gen- not enough for a domain taster to divest within the meaning of the ACPA; and (2) erate revenue by linking to other itself of confusingly similar domains dur- defendants’ “deletion of a tasted domain websites, some of which offer ing the AGP. Rather, domain tasters who based on trademark compliance purposes” products and services that compete “reserve” confusingly similar domains during the AGP does not constitute bad- with Plaintiffs’. Determining later (even if they are never registered) are sub- faith use of a domain name. Defendants just how much Internet traffic was ject to liability. further claimed that plaintiffs’ request to diverted from Plaintiffs’ sites to However, in refusing to enjoin the enjoin defendants from using automated competing sites through Defendants’ defendants from using an automated pro- registration processes should be denied briefly held, and constantly chang- cess to identify and register domain names because, among other reasons, “it would ing, similar domain names, is likely in bulk, the court has left trademark owners stop Navigation’s entire business.”28 to prove impossible.31 with an imperfect remedy. It seems evident from the facts of this case that—at least The Court’s Decision Most significantly, the court held that with respect to the defendants’ system— The court rejected defendants’ argument “[t]he use of ‘confusingly similar’ domain automated processes are ineffective in pre- that domain tasting does not constitute names during the Add Grace Period is venting the registration of confusingly sim- “registration” for purposes of the ACPA, within the scope of the harms the ACPA ilar domain names. Moreover, as is clear noting that “‘reserving’ versus ‘register- was enacted to prevent,” and enjoined from this case, by the time a mark owner is ing’ is a distinction without a difference— defendants from registering or using any able to bring suit against a domain taster, either here entitles Defendants to the domain name confusingly similar to plain- many, if not most, of the infringing domain exclusive control and use of the names at tiffs’ marks.32 registrations will have changed hands. The issue, at least for some period of time.” The court was not persuaded, however, mark owner will therefore continue to suf- In any event, the court concluded that the of a need to enjoin the defendants from fer harm from the monetization of those defendants’ use of those domain names continuing to use an automated process domains and faces a seemingly everlasting during the AGP by hosting websites to register domain names in bulk. First, struggle against infringement, even after “using the challenged domain names, on the court noted that the plaintiffs had not establishing a likelihood of success on the which were posted paid advertising links established how an injunction barring the merits of its claims. to other websites, in some instances sell- defendants from registering domain names ing products in direct competition with that are confusingly similar to plaintiffs’ Conclusion plaintiffs,” satisfied the statutory require- marks would adequately protect their As the number of domain names being ments of the ACPA. 29 rights. The court was persuaded, however, tasted increases, so does the level of dif- The court went on to find bad-faith by defendants’ claim that such an injunc- ficulty for trademark owners to police and use of the domain names, emphasizing tion would essentially put the defendants protect their marks. Although it appears in particular: (1) defendants’ clear intent out of business, which the court concluded that the courts are willing to find that “to profit from the poor typing abilities of was “not justified on the record currently domain tasting falls within the scope of consumers trying the reach the plaintiffs’ before the court.” Finally, the court noted conduct the ACPA is meant to prevent, sites”; (2) the fact that the websites asso- that the plaintiffs had not demonstrated as a practical matter, trademark owners ciated with the domain names contained that the defendants’ automated registra- remain on the domain tasting merry-go- links to competitors of the Plaintiffs tion process could not ever be “conducted round, chasing infringing domains from

Published in Intellectual Property Litigation, Volume 20, Number 2, Winter 2009 © 2009 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof • 3 may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. one place to the next with no clear end in Jan. 30, 2008. similar to a distinctive mark, or is identi- sight.34 l 8. Drop-Catching, supra note 6, at 3. cal or confusingly similar to or dilutive 9. WIPO Press Release, supra note 6; of a famous mark. 15 U.S.C. § 1125(d)(1) Patrick M. Fahey is a partner and Kirk, ICANN Considers Plan, supra note (A). Susan S. Murphy is an associate with 6; Anick Jesdanum, Entrepreneurs Profit 17. See Jesdanum, supra note 9; Kirk, Shipman & Goodwin LLP in Hartford, From Free Web Names, USA To d a y , ICANN Considers Plan, supra note 7. Connecticut. Feb. 19, 2007; Leslie Walker & Brian 18. WIPO Press Release, supra note 6; Krebs, The Web’s Million-Dollar Typos, Drop-Catching, supra note 6, at 3. Endnotes Was h i n g t o n Po st , April 30, 2006. 19. 15 U.S.C. § 1125(d)(2)(D)(i)(II). 1. Defendants’ Memorandum of Points 10. Press Release, Coalition Against 20. Verizon Cal., Inc., No. CV 08 and Authorities in Opposition to Motion Domain Name Abuse, CADNA Releases 2463, at 3–4. for Preliminary Injunction [hereinafter Study on Drop-Catching (Jan. 30, 2008), 21. Complaint for Cybersquatting; Defendants’ Opposition] 17, Verizon Cal., available at www.cadna.org/en/news- Trademark Infringement; False Inc. v. Navigation Catalyst Sys., Inc., No. room/updates/drop-catching-study. Designation of Origin; Dilution; and CV 08 2463 (C.D. Cal.). 11. Id.; WIPO Press Release, supra Unfair Competition at ¶¶ 45–47, 53, 2. Verizon Cal., Inc., No. CV 08 note 6; Walker & Krebs, supra note 9; 55–56, 59–60, Verizon Cal., Inc., No. CV 2463 (C.D. Cal. June 30, 2008), avail- White Paper, Coalition Against Domain 08 2463 (C.D. Cal.). able at http://docs.justia.com/cases/ Name Abuse, Tasting Solutions: An 22. [Proposed] Order Granting Motion federal/district-courts/california/cacdce/ Evaluation and Analysis of Proposed for Preliminary Injunction at 2, Verizon 2:2008cv02463/413394/32/0.pdf. Solutions to Address the Domain Name Cal., Inc., No. CV 08 2463 (C.D. Cal.). 3. Plaintiffs’ Memorandum of Points Tasting Crisis [hereinafter Tasting 23. Plaintiffs’ Motion, supra note 3, at and Authorities in Support of Motion Solutions] 4–5 (Nov. 1, 2007), available 19–20. for Preliminary Injunction [hereinafter at http://www.cadna.org/en/newsroom/ 24. Defendants’ Opposition, supra Plaintiffs’ Motion] 21 n.7, Verizon Cal., updates/tasting-solutions. note 1, at 6; Affidavit of Seth Jacoby in Inc., No. CV 08 2463 (C.D. Cal.). 12. Walker & Krebs, supra note 9; Support of Defendant’s Opposition to 4. Verizon Cal., Inc., No. CV 08 2463, Tasting Solutions, supra note 11, at 5; Motion for Preliminary Injunction [here- at 4 (C.D. Cal. June 30, 2008) (order see also generally Jeremy Kirk, Dell inafter Jacoby Affidavit] at ¶¶ 4 & 6, granting in part and denying in part Suit Reveals Lucrative Trade in Domain Verizon Cal., Inc., No. CV 08 2463 (C.D. motion for preliminary injunction). Names, PC Wo r l d , Feb. 6, 2008. Cal.). 5. Press Release, Coalition Against 13. Drop-Catching, supra note 6, at 25. Id. at 6–7; Jacoby Affidavit, supra Domain Name Abuse, CADNA Responds 3; Tasting Solutions, supra note 11, at 4; note 24, at ¶ 13. to ICANN Tasting Survey (Sept. 24, Brian Krebs, New Policy Aims to Curb 26. Verizon Cal., Inc., No. CV 08 2007), available at http://www.cadna. Web Site Name Abuse, Was h i n g t o n Po st , 2463, at 4–5; see also Defendants’ org/en/newsroom/press-releases/tasting- Jan. 30, 2008; Brad Stone, Coins in the Opposition, supra note 1, at 2. survey. New Realm, N.Y. Ti m e s , Feb. 1, 2008. 27. Defendants’ Opposition, supra note 6. Press Release, World Intellectual 14. Coalition Against Domain Name 1, at 10–13. Prop. Org., Cybersquatting Remains on Abuse, The Real Cost of Cybersquatting, 28. Id. at 21–24. the Rise with Further Risk to Trademarks available at http://www.cadna.org/en/ 29. Verizon Cal., Inc., No. CV 08 from New Registration Practices (March resources/real-cost-of-cybersquatting (last 2463, at 10. 12, 2007) [hereinafter WIPO Press visited Sept. 9, 2008). 30. Id. at 12–13. Release], available at http://www. 15. WIPO Press Release, supra note 31. Id. at 14–15. wipo.int/pressroom/en/articles/2007/ 6. The UDRP prohibits the bad-faith use 32. Id. at 15–16. article_0014.html. The related practice of and registration of a domain name that 33. Id. at 16. domain kiting is “the tasting practice of is identical or confusingly similar to a 34. ICANN has recently voted to make repeatedly adding and dropping the same trademark or service mark in which the the registration fee (currently $0.20) non- domain every few days in order to avoid complainant has rights by one who has refundable. It is unclear what effect this the registration fee, while monetizing the no rights or legitimate interests in respect measure will have in curbing domain traffic by loading the page with recycled of the domain name. Uniform Dispute tasting. While some have opined that the pay-per-click (PPC) advertising links.” Resolution Policy, ¶ 4a, available at imposition of this fee will render domain White Paper, Coalition Against Domain http://www.icann.org/en/udrp/udrp-policy- tasting unprofitable, at least one trademark Name Abuse, Drop-Catching: A Study on 24oct99.htm (last visited Sept. 14, 2008). owners’ advocacy group has expressed the Fate of Expiring Domains and How 16. Lucas Nursery & Landscaping, skepticism that the fee will have any the Add Grace Period Is Leveraged to Inc. v. Grosse, 359 F.3d 806, 808 (6th effect on the practice. See Krebs, supra Avert Domain Name Investment Risk 3 Cir. 2004) (internal quotation marks omit- note 13; Press Release, Coalition Against (Jan. 2008) [hereinafter Drop-Catching], ted). Under the ACPA, a mark owner has Domain Name Abuse, ICANN’s Tasting available at http://www.cadna.org/en/ a means of redress against one who, with Solution a Partial Success (June 27, newsroom/updates/drop-catching-study. a bad-faith intent to profit from the mark, 2008), available at http://www.cadna. 7. Jeremy Kirk, ICANN Considers Plan registers, traffics in, or uses a domain org/en/newsroom/press-releases/ to Stop “Domain Tasting,” N.Y. Ti m e s , name that is either identical or confusingly -tasting-solution.

4 • Published in Intellectual Property Litigation, Volume 20, Number 2, Winter 2009 © 2009 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.