ACPA Legislative History: Registering Domain Names of Established Trademarks Is Akin To Cyber-Piracy . Did you ever wonder what Congress and industry experts found in drafting the Anti-Cybersquatting Protection Act (ACPA)? See this extended post for legislative history highlights.
Many judges in the US and abroad simply don't understand the internet, let alone the domain name registration system or ICANN policies. Too often, cybersquatting complaints under the ACPA are met with blank stares - or even worse yawns - from the bench.
- If trademarks can be 'fairly used' to describe products or services consistent with trademark holder rights, why can't a third party use a trademark in a domain name?
- And if trademarks can be used by third parties in certain instances in the folder or file name portion of the domain path (www.domainname/folder/filename.htm), why can't the trademark be used in the domain name itself?
Registering, trafficking or using famous or registered trademarks in a domain name without permission or license from the trademark holder is per se unlawful (of course assuming likelihood of confusion and other elements are satisfied). Other internet uses of trademarks, such as noted above, may be legal. The answer to the question "What Makes Domain Names So Special?" is found in the language of the ACPA statute its legislative history.
Just like a shoe store can use Nike's trademark in a shoe sale advertisement or display, a third party can sometimes claim fair use of a trademark on a web page or in the domain path to the right of the TLD. However, a third party can not use 'Nike' in its company name, store name or domain name since these types of uses suggest common ownership, sponsorship or affiliation with Nike, Inc.
For a full and comprehesive analysis of the legislative history behind the ACPA, keep reading below ..
The Anticybersquatting Consumer’s Protection Act: legislative History & Analysis.
Congress passed the Anticybersquatting Consumer’s Protection Act in 1999 with the intent of protecting trademarks used in internet domains from internet pirates who use domain names in bad faith to exploit the good will of rightful trademark holders for their own personal gain. As the practice of cybersquatting increased, Congress recognized the need to protect trademarks used in domain names on the internet in a similar manner to the way the Lanham act protects Trademarks in the “brick and mortar” world. Congress passed the legislation with overwhelming support and revolutionized the protection of Trademarks in the cyber age.
In November, 1999 the two houses of the U.S. Congress Submitted to the President an omnibus appropriations package (H.R. 3194) that became Public Law 106-113. President Clinton signed the legislation on November 29, 1999, and title III of the bill included the “Trademark Cyberpiracy Prevention” added a new section to the United States Trademark Act of 1946 (Lanham Act), 15 USC § 1125(d). This legislation added section 43(d) to the Lanham Act in order to protect trademark holders from those intending to “cybersquat” with the bad-faith intent to profit from the goodwill of another’s trademark. What follows is a summary and legislative history of the Anticybersquatting Consumer’s Protection Act of the Intellectual Property and Communications Omnibus Reform Act of 1999.
Introduction in the Senate
On June 21, 1999 Senator Spencer Abraham from Michigan introduced S. 1255 to the Senate. The aim of this legislation was to “combat a new form of high-tech fraud,” that was becoming a common practice. Cybersquatting occurs when a trademark holder establishes an online domain identifier, and a “cybersquatter” then reserves an internet domain name, or identifier that is similar, or nearly identical to that of a trademark. Once a cybersquatter has registered this similar domain name, he or she can, as Senator Abraham put it, “engage in a variety of nefarious activities…” ranging from the “relatively-benign parody of a business or individual” to the “redirecting an unsuspecting consumer to pornographic content.” This was only one of Senator Abraham’s fears, though this was one of the goals of the Anticybersquatting Consumer Protection Act (ACPA), was not the main purpose. The stated purpose of the bill "is to protect consumers and American businesses, to promote the growth of online commerce, and to provide clarity in the law for trademark owners by prohibiting the bad-faith and abusive registration of distinctive marks as Internet domain names with the intent to profit from the goodwill associated with such marks--a practice commonly referred to as cybersquatting.”
In S. 1255, The Anticybersquatting Consumer Protection Act. (Referred in House), Congress found:
(1) The registration, trafficking in, or use of a domain name that is identical to, confusingly similar to, or dilutive of a trademark or service mark of another that is distinctive at the time of registration of the domain name, without regard to the goods or services of the parties, with the bad-faith intent to profit from the goodwill of another’s mark (commonly referred to as ‘cyberpiracy’ and ‘cybersquatting’)
(A) results in consumer fraud and public confusion as to the true source or sponsorship of goods and services;
(B) impairs electronic commerce,
(C) deprives legitimate trademark owners of substantial revenues and consumer goodwill; and
(D) places unreasonable, intolerable, and overwhelming burdens on trademark owners in protecting their valuable trademarks.
“Whether perpetrated to defraud the public or to extort the trademark owner, squatting on internet addresses using trademarked names is wrong,” pronounced Sen. Abraham. He provided examples of the most egregious forms of cyber squatting; namely, holding out a domain for extortionate compensation. The effect of this practice was to undermine consumer confidence, discourage consumer use of the internet, and destroy the value of brand names and trademarks of this nation’s businesses. The Senator provided two examples of the means employed by cybersquatters to extort those who hold protected trademarks.
Gateway Computers paid $100,000 to a cybersquatter who had placed pornographic images a website bearing a domain name including Gateway’s trademarked name. He also described another issue regarding Paine Webber and a similar scheme by a cybersquatter to extort financial gain from squatting on a domain. Paine Webber had to sue the squatter, though the “pre-internet law” applied in the “post-internet world” was uncertain, and the grounds for future cases unpredictable. The Senate introduced S. 1255 to provide certainty in the law, and a remedy for those whose trademarks were infringed upon.
Senate Committee on the Judiciary’s Consideration of the ACPA
On July 22, 1999, the Senate Committee on the Judiciary met to consider the Bill. The Committee heard testimony from Anne Chaser, president of the International Trademark Association, Gregory D. Phillips, outside trademark counsel for Porsche Cars North America, and Christopher D. Young president of Cyveillance Inc. Each of these individuals provided testimony as to the need for the protection of domain names that utilize established Trademarks. Testimony ranged from the need to protect business from being deprived the legitimate use of its trademarks by those seeking to defraud consumers and businesses, to the pre-legislative handling of domain disputes.
Anne Chaser, President of International Trademark Association provided information as to a usable definition of, and the nature of cybersquatting. She defined cybersquatting as “the registration and trafficking in Internet domain names with the bad-faith intent to benefit from another's trademark.” “If the Internet is about getting rich quick,” noted Ms. Chaser, “they don’t come any faster than cybersquatters.” She referred to the cost of registering a domain name, being approximately $70.00 to the windfall a cybersquatter would receive in either trafficking the domain, or using the good will established by the trademark to profit off of the website by defrauding consumers, or to capitalize on consumer confusion. “That is what cybersquatting is all about,” pronounced Ms. Chaser, “getting rich quick off of the hard work and investment of trademark owners.”
Attorney Gregory D. Phillips elaborated on the purpose behind cybersquatting. One reason cybersquatters engage in this activity is to “divert internet traffic to unauthorized web sites selling products related to the trademarks. As outside counsel for Porsche, he noted that the domain name EVERYTHINGPORSCHE.COM, for example, diverts Internet users to an unauthorized web site that sells parts for Porsche automobiles. The operator of the web site is not an authorized Porsche Dealer and sells both genuine and non-genuine Porsche parts. The web site uses a counterfeit of the Porsche Crest® trademark in the wallpaper of the web site. The effect is the misappropriation of the Trademark for the personal gain of those not authorized to use it.
Sen. Hatch noted the additional problems of trademarks in cyberspace as opposed to the conventional setting. He noted "the problems of brand-name abuse and consumer confusion are particularly acute in the online environment." He also observed that a consumer in a "brick and mortar" world has the luxury of a variety of additional indicators of source and quality aside from a brand name. For example, when one walks in to the local consumer electronics retailer, he is fairly certain with whom he is dealing, and he can often tell by looking at the products and even the storefront itself whether or not he is dealing with a reputable establishment. He further noted that these protections are largely absent in the electronic world, where anyone with Internet access and minimal computer knowledge can set up a storefront online. 
Senator Hatch lamented that "In many cases what consumers see when they log on to a site is their only indication of source and authenticity, and legitimate and illegitimate sites may be indistinguishable in cyberspace. In fact, a well-known trademark in a domain name may be the primary source indicator for the online consumer. So if a bad actor is using that name, rather than the trademark owner, an online consumer is at serious risk of being defrauded, or at the very least confused." Senator Hatch noted that this leads to the erosion of consumer confidence in electronic commerce and destroys the value of brand name identifiers. After a few changes the Senate passed the bill with unanimous consent, and sent it to the House of Representatives for consideration as H.R. 3028.
House Report 106-412 on The Trademark Cyberpiracy Prevention Act
The Judiciary Committee of the House of Representatives reported the “Trademark Cyberpiracy Prevention Act,” on October 25, 1999. The purpose of the legislation was to provide trademark owners important tools to protect their intellectual property from pirates who register internet domain names containing American trademarks for money. The report also criticized those exploiting the use of trademarks in domain names, with the hopes of selling the trademarks for a windfall, or depriving the true trademark owner of its mark, and blurring the distinctive quality of the mark.
The House recognized the need for legislation due to the harm cyber piracy causes trademark holders doing business online. The House noted that the “expropriation of a mark” as a part of a domain name causes consumers seeking the trademark owner’s website to be directed elsewhere. This results in many lost business opportunities for the trademark owner. Furthermore, the cyberpirate’s use of the trademark derogates the quality of the mark, which tarnishes the mark for the rightful holder. In turn, Cyberpirates require businesses “to police and enforce their trademark rights by preventing unauthorized use, or risk losing those rights entirely.” The purpose of this act was to prevent those who, register, trafficking in, or use of a domain name that is identical to, confusingly similar to, or dilutive of the trademark or service mark of another, if the mark was distinctive at the time the domain name was registered. The House unanimously passed the bill, which was folded into the omnibus appropriations package (H.R. 3194) that became P.L. 106- 113.
When Congress passed the Amendment to 15 U.S.C §1125 in 1999, it sought to prevent “cyberpirate” and “cybersquatters,” from unlawfully utilizing internet domain names that tread on the lawful trademarks of businesses. The purpose was to protect consumers from fraud, and protect businesses from the derogation of their good will. The internet is not a “rock and mortar world,” and thus adequate protection of “rock and mortar” trademarks in the virtual world was needed. Congress recognized this need, and passed Antipiracy Consumer Protection Act, as codified in 15 U.S.C. §1125(43)(d). Because of the passage of this bill, cybersquatters are no longer able to reap what someone else has sown by misappropriating a trademark, or a portion of a trademark in the registration of an internet domain name.
 106 Cong. Rec. S7334 (daily ed. June 21, 1999)(statement of Sen. Abraham)
 106 Cong. Rec. S7336 (daily ed. June 21, 1999)
 Cybersquatting and Consumer Protection: Ensuring Domain Name Integrity, 106th Cong. (1999)
 Id. (statement of Anne Chasser, President of the International Trademark Association.)
 Id. (statement of Gregory D. Phillips, Howard, Phillips and Andersen.)
 Id. (Statement of Sen. Hatch, Member, Sen. Comm. On the Judiciary).
 H.R. Rep. 106-412, at 5 (1999) (online at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_cong_reports&docid=f:hr412.106.pdf)
 Id. at 6.
 Id. at 10.