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Cybersquatting and Consumer Protection: Ensuring Domain Name Integrity

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Cybersquatting and Consumer Protection: Ensuring Domain Name Integrity S. HRG. 106±687 CYBERSQUATTING AND CONSUMER PROTECTION: ENSURING DOMAIN NAME INTEGRITY HEARING BEFORE THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED SIXTH CONGRESS FIRST SESSION ON S. 1255 A BILL TO PROTECT CONSUMERS AND PROMOTE ELECTRONIC COM- MERCE BY AMENDING CERTAIN TRADEMARK INFRINGEMENT, DILU- TION, AND COUNTERFEITING LAWS, AND FOR OTHER PURPOSES JULY 22, 1999 Serial No. J±106±39 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 67±164 CC WASHINGTON : 2000 VerDate 11-MAY-2000 12:11 Oct 20, 2000 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 CYBER SJUD4 PsN: SJUD4 COMMITTEE ON THE JUDICIARY ORRIN G. HATCH, Utah, Chairman STROM THURMOND, South Carolina PATRICK J. LEAHY, Vermont CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, JR., Delaware JON KYL, Arizona HERBERT KOHL, Wisconsin MIKE DEWINE, Ohio DIANNE FEINSTEIN, California JOHN ASHCROFT, Missouri RUSSELL D. FEINGOLD, Wisconsin SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York BOB SMITH, New Hampshire MANUS COONEY, Chief Counsel and Staff Director BRUCE A. COHEN, Minority Chief Counsel (II) VerDate 11-MAY-2000 12:11 Oct 20, 2000 Jkt 000000 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 CYBER SJUD4 PsN: SJUD4 C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Abraham, Hon. Spencer, U.S. Senator from the State of Michigan .................... 1 Hatch, Hon. Orrin G., U.S. Senator from the State of Utah ................................ 3 Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont ....................... 41 CHRONOLOGICAL LIST OF WITNESSES Statement of Anne H. Chasser, president, International Trademark Associa- tion, Washington, DC; Gregory D. Phillips, Howard, Phillips & Andersen, Salt Lake City, UT; and Christopher D. Young, president and co-founder, Cyveillance Inc., Arlington, VA ........................................................................... 5 ALPHABETICAL LIST AND MATERIALS SUBMITTED Chasser, Anne H.: Testimony .......................................................................................................... 5 Prepared statement .......................................................................................... 6 Phillips, Gregory D.: Testimony .......................................................................................................... 10 Prepared statement .......................................................................................... 12 Young, Christopher D.: Testimony .......................................................................................................... 44 Prepared statement .......................................................................................... 46 APPENDIX QUESTIONS AND ANSWERS Responses of Anne H. Chasser to questions from Senators: Hatch ................................................................................................................. 59 Leahy ................................................................................................................. 60 Abraham ............................................................................................................ 61 Responses of Gregory D. Phillips to questions from Senators: Hatch ................................................................................................................. 62 Leahy ................................................................................................................. 67 Abraham ............................................................................................................ 70 Responses of Christopher D. Young to questions from Senators: Hatch ................................................................................................................. 71 Leahy ................................................................................................................. 72 Abraham ............................................................................................................ 72 ADDITIONAL SUBMISSIONS FOR THE RECORD Prepared statement of Jessica Litman, professor of law, Wayne State Univer- sity ......................................................................................................................... 73 Letter to Senator Hatch from A. Michael Froomkin, University of Miami, school of law, dated July 22, 1999 ...................................................................... 77 (III) VerDate 11-MAY-2000 12:11 Oct 20, 2000 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 CYBER SJUD4 PsN: SJUD4 VerDate 11-MAY-2000 12:11 Oct 20, 2000 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 CYBER SJUD4 PsN: SJUD4 CYBERSQUATTING AND CONSUMER PROTEC- TION: ENSURING DOMAIN NAME INTEGRITY THURSDAY, JULY 22, 1999 U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC. The committee met, pursuant to notice, at 2:07 p.m., in room SD±628, Dirksen Senate Office Building, Hon. Spencer Abraham presiding. Also present: Senators DeWine and Leahy. OPENING STATEMENT OF HON. SPENCER ABRAHAM, A U.S. SENATOR FROM THE STATE OF MICHIGAN Senator ABRAHAM. We will come to order, and we welcome every- body and thank our panel that I will introduce in just a moment or so. Senator DeWine, we appreciate his being here, too. This is a hearing on Cybersquatting and Consumer Protection: Ensuring Domain Name Integrity. I would like to just make a few opening statements here, and then if any other members join us, we will offer the minority an opportunity to respond. Senator DeWine, if you have an opening statement, we will allow you as well. 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 activitiesÐfrom the relatively benign par- ody of a business or individual, to the obscene prank of redirecting an unsuspecting consumer to pornographic content, to the destruc- tive worldwide slander of a centuries-old brand name. This behav- ior undermines consumer confidence, discourages Internet use, and destroys the value of established brand names and trademarks. Our economy, and its ability to provide high-paying jobs for American workers, is increasingly dependent upon technology. Electronic or e-commerce, in particular, has been an engine of great economic growth for the United States. Between businesses, e-com- merce has grown to an estimated $64.8 billion for 1999 alone. Ten million customers shopped for some product using the Internet in 1998. International Data Corporation estimates that $31 billion in (1) VerDate 11-MAY-2000 12:11 Oct 20, 2000 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 CYBER SJUD4 PsN: SJUD4 2 products will be sold over the Internet in 1999. And 5.3 million households will have access to financial transactions like banking and stock trading by the end of this year. If we want to maintain our edge in this emerging marketplace, then we must address the problems which endanger the continued growth of electronic com- merce. Cybersquatting has already caused significant damage in this area. Even computer-savvy companies buy domain names from cybersquatters at extortionate rates to rid themselves of a head- ache with no certain outcome. For example, Gateway computers recently paid $100,000 to a cybersquatter who had placed pornographic images on the website www.gateway20,000. But rather than simply give up, several com- panies, including Paine Webber, have instead sought protection of their brands through the legal system. However, as with much of the pre-Internet law that is applied to this post-Internet world, precedent is still developing, and at this point one cannot predict with certainty which party to a dispute will win and on what grounds. In fact, one of our panelists will provide us with a first- hand account of this shortly. Whether perpetrated to defraud the public or to extort the trade- mark owner, squatting on Internet addresses using trademarked names is wrong. Trademark law is based on the recognition that companies and individuals build a property right in brand names because of the reasonable expectations they raise among consum- ers. If you order a Compaq or Apple computer, that should mean that you get a computer made by Compaq or Apple, not one built by a fly-by-night company pirating the name. The same goes for trademarks on the Internet. To protect Internet growth and job production, Senators Torricelli, Hatch, McCain, and I recently introduced an anticybersquatting bill which has received strong public support. A number of suggestions have convinced me of the need for substitute legislation which addresses the issue of in rem jurisdiction and which eliminate provisions dealing with criminal penalties, and I have been pleased to work with Senator Leahy and Senator Hatch to that effect. As it now stands, the substitute legislation would establish uni- form Federal rules for dealing with this attack on interstate elec- tronic commerce, supplementing existing rights
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