The Brave New World of Policing Trademarks By Patrick M. Fahey and Susan S. Murphy t’s a brave new world for trademark when the entity tasked with coordination ber of registrars and individuals register owners. By some accounts, “virtu- of the Internet domain name 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 domain tasting 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 cybersquatting—“typosquatting”—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.