Christopher T. Varas: "Sealing the cracks: a proposal to update the anti-cybersquatting regime to combat advertising-based cybersquatting." Journal of Intellectual Property Law & Practice Advance Access originally published online on February 20, 2008.
In this article, Mr. Varas takes the position that the UDRP and ACPA are no longer effective to protect mark owners and proposes stronger laws. Specifically, Mr. Varas proposes that a finding of cybersquatting under the UDRP result in prima facia case under the ACPA, thus making money damages more likely. You need to be a subscriber to read the full article. Here are some snippets.
EXCERPT: Recent years have seen a resurgence in the practice of cybersquatting, and in particular cybersquatting that monetizes domain names through pay-per-click advertisements. Existing statutory and administrative anti-cybersquatting tools were not designed to cope with the advertising-based model of cybersquatting. As a result, brand owners lack effective tools to combat modern cybersquatting.
(1) Where cybersquatters originally monetized their domain name portfolios by ransoming small numbers of domain names to brand owners, they now use pay-per-click advertisements spread over massive portfolios. Technological advances in the domain name system will continue to increase the opportunities for cybersquatters to expand these portfolios.
(2) Existing statutory and administrative anti-cybersquatting tools are out-dated and ineffective. The Uniform Domain Name Dispute Resolution Process is procedurally incapable of coping with large portfolios of infringing domain names and substantively out of sync with national IP laws. Traditional litigation is too expensive and inefficient to offer a workable solution for brand owners.
(3) Both administrative and legal remedies for cybersquatting have inherent flaws that cannot practically be remedied. A new anti-cybersquatting regime must therefore allow them to work together. The UDRP should be procedurally updated to allow limited discovery and facilitate large-scale cases, and an optional choice of law clause should be introduced to bring UDRP panel decisions more in line with national IP laws. Likewise, those laws should be revised to give explicit deference to UDRP decisions in litigation arising from the same facts as the UDRP action.
Mr. Varas first proposes limited discovery under the UDRP. Specifically, a registrar would be required to disclose all domains registered by the Respondent Registrant. The UDRP complaint would be amended to include all other domains alleged to be infringing:
Updated UDRP Procedures: Updating the UDRP’s procedures The first step in the development of an anti-cybersquatting regime that harnesses the collective power of the UDRP and national laws is to update the UDRP’s antiquated procedures to facilitate the recovery of domain names in the volumes that modern cybersquatters register them.
The first step in updating the UDRP process must be to make it easier for brand owners to defeat these tactics. The ideal solution would be for registrars to verify all registrant WHOIS data and for a Reverse WHOIS search capability to be deployed across the entire WHOIS database. Since neither of those solutions currently exists, this article suggests a more limited solution: registrars should be required to assist in UDRP proceedings by supplying lists of domain names with common ownership upon request from a brand owner who has initiated a UDRP proceeding. ...
The dispute resolution provider with whom the complaint is filed would provide the complaint to the registrars of the domain names Acme identified, requesting production of a log
containing all of the domain names registered by the same entity or person who registered the identified domain names. ...
For example, it may be advisable for registrars to search for common ownership based only
on commonalities in the two pieces of data supplied by the registrant that are most likely to be valid: administrative email addresses (which are likely to be valid because registrars use them to communicate with registrants about routine administrative matters) and methods of payment (such as the same credit card or PayPal account). While such a restriction may limit the scope of domain names revealed to Acme, the highly unreliable nature of the other, unverified, data could create an unacceptable risk of false positives. ...
The UDRP pricing would be modified to accommodate complaints filed by mass cybersquatters, and a maximum fee would apply to mass squatting situations.
WIPO and the National Arbitration Forum should amend their tiered fee structures to provide set fees for actions regarding up to 500 domain names. The idea of tiered fees is fundamentally sound, and should be retained, but the break points should be significantly adjusted to facilitate the kinds of bulk actions required by modern cybersquatting.
Currently, UDRP panelists do little to test the merits of a trademark claim. If a mark is registered, it is presumed valid. Very little need be shown in terms of the ultimate question presented under trademark law, likelihood of confusion. Upon filing and after disclosure of all allegedly infringing domains, the Complainant would need to make a choice. They could proceed under the UDRP as it currently exists with its limited analysis and even more limited remedies. Or Complainant could elect to raise the burden of proof for itself by requesting the the UDRP panelist apply one set of national laws to test the strength of their trademark, liklihood of confusion, etc and gain stronger more streamlined remedies for damages under national law. Presumably, a UDRP complainant who wished to elect the national law options would chose the national laws where it intended to follow-up in court:
The UDRP’s permissive standards have manifested themselves in haphazard decisions that vary from one panel to the next. ‘While some panelists apply the law of the country in which the parties are domiciled, others either merely apply the law of the panelists’ country of
origin or, more commonly, refuse to consider any nation state’s law in favor of resolving the dispute exclusively in accordance with the UDRP rules’.126 Observers have noted that these open-ended standards have also resulted in proceedings being skewed in favour of brand owners when panels give the complainant’s arguments more weight than the respondent’s or shift the burden of proof from the complainant to the respondent....
If the two are to work together against cybersquatters, the disconnect must be eliminated. The only way to accomplish that is to realign the UDRP with national laws. To that end, the UDRP should be amended to include a voluntary choice of law clause that complainants can use to ensure that a UDRP panel evaluates its complaint using the substantive law of a particular jurisdiction.
Mr. Varas anticipates that any complainant electing to applying national laws (which will test the trademark rights more vigorously than currently tested under the UDRP) will make a transfer order more challenging. In cases of clear cut mass cybersquatting (ie the Dell case, recently filed), the more difficult standard would be easy to satisfy only if trademark rights were established.
The choice of law option has a potential disadvantage for brand owners. While the more stringent standards imposed by national IP laws should make UDRP panel decisions more consistent, they could also make it more difficult for a brand owner to reclaim a registrant’s domain names. If that additional risk were to dissuade brand owners from using the choice of law option, the updated anti-cybersquatting regime might be little more effective than the current regime. However, the overtly bad faith nature of cybersquatting should keep that risk fairly low.
National laws would need to be updated so that UDRP decisions would have some level of authority in national courts. Mr. Varas also proposes that countries incorporate statutory damages into their law similar to the ACPA under US law. This would create penalties and true risk to mass cybersquatters.
The goal of such amendments should be to streamline the litigation process such that brand owners can pursue legal and equitable remedies against cybersquatters with less investment of time, money, and energy than at present. The most appropriate statutory amendments would vary from jurisdiction to jurisdiction, but a useful strategy could be to provide that, if a
UDRP panel applies the law of the relevant jurisdiction, a panel decision in the brand owner’s favour constitutes prima facie evidence of infringement that creates a rebuttable presumption in favour of the brand owner in subsequent litigation arising from the same set of facts as the UDRP complaint.
Many domain owners will no doubt take issue with the particulars of the various aspect of his proposal. And it is unclear that any real change is possible given the politics of the UDRP and the difficulties of amending so many national laws. However, one thing is clear. Neither trademark holders nor domain registrants are satisfied with the current system.
Domainers agree that mass cybersquatters and typosquatters on strong trademarks should be dealt with more harshly; mass bad faith squatters are hurting the legitimate domain industries attempts to distinguish themselves as legitimate. Stories about mass squatters won't go away under the current system. The disincentives to mass squatting are too weak to stem the growth of bad faith squatting on established marks. Top domainers such as Rick Schwartz and Frank Schilling are pushing for transparency, again to increase legitimacy of the domain market. Mass squatters are hurting legitimate domainers arguably more than the trademark holders because the general public and 'joe politician' too often fail to distinguish between legitimate domaining and cybersquatting.
The buying and selling of generic or, in many cases descriptive, domains is legitimate. Pizza.com just sold for $2.6 million. Rick Schwartz sold ireport.com to CNN last year for $750,000. Kudos to both sellers. That is what capitalism is all about.
Domainers complain that their descriptive domains too often get transfered under the UDRP even when the the marks are weak, since the strength of the complainant's mark is only lightly tested under the UDRP. The more stringent trademark analysis under national laws would potentially result in fewer transfer orders on weak marks. It is important when analyzing Mr. Varas' proposal to understand that it attempts to deal only with the problem of mass squatting against strong trademarks. It does nothing to change any current inequities of the UDRP from either the trademark or legitimate domainer perspectives.
As predicted by Rick Schwartz, 2008 is shaping up to be the year when the landscape for domainers is changing. The problem of cybersquatting - the kind everyone agrees is bad - is starting to dominate the discussion in cyberspace, in court and by policy makers. The question of whether legitimate domainers get thrown under the bus will depend on whether the domainer community can continue get organized, find its voice, educate the public and continue to distinguish itself as legitimate.