NY Startup Law

A businesslaw blog for New York entrepreneurs by Marc Law Associates PLLC

TRADEMARK AND DOMAIN NAME; WHAT DOES ONE HAVE TO DO WITH THE OTHER??

You’ve decided that you want to expand your brand’s reach and build your first or one of many websites. Then you take the first step and register your domain name. A few months later you get a cease and desist letter in the mail from a company that owns a registered trademark claiming that your domain name infringes on its trademark by creating a likelihood of confusion in its existing customer base. Uh oh. What do you do now? This post will examine the legal analysis require in this type of situation as well as the methods available to fight for your domain name if you feel that it’s worth it.

DOMAIN NAME REGISTRATION

Trademarks and domain names are similar in some respects, but different in others. The similarity is that companies can use both to identify goods or services. However, they are different in that one acquires a trademark in a name by exploiting its use in commerce under common law or registering the mark with the company’s home state or the federal government through the US Patent and Trademark Office (PTO).  Alternatively, anyone can buy a domain name just by logging on to the internet and entering a contract with a domain name provider (e.g. Go Daddy) without using the name in commerce.

Another difference is that one cannot obtain a trademark for a generic or descriptive terms describing the product (i.e. probably can’t register Fresh Deodorant to sell deodorant)  without the mark establishing secondary meaning (becoming popular enough to be recognized as a brand). However, in the domain name world,  a descriptive domain name is ideal for SEO purposes and can be very valuable (e.g.  construction.com).

There are instances when the registration of a domain name that mirrors an existing trademark can lead to liability for the purchaser of the domain names. The federal law that addresses these instances is the Anti- Cybersquatting Consumer Protection Act (commonly known as “ACPA”), which is a federal law. Alternatively,. these disputes can also be resolved by starting an administrative proceeding (mediation outside of court) under the Uniform Domain Name Dispute Resolution Policy (commonly known as “UDRP”), which was created by the Internet Corporation for Assigned Names and Numbers ( commonly known as “ICANN”), a governmental agency that regulates and governs domain name registration, as a cheap alternative to resolve domain name disputes through the use of one of three designated arbitration panels.

ACPA ANALYSIS

The ACPA prohibits bad faith domain name registration with the intent to profit from the popularity or goodwill of an existing trademark. See 15 U.S.C § 1125(d), 1129. Pursuant to 15 U.S.C. § 1117, if the trademark owner wins a lawsuit under the ACPA it can obtain an injunction, which is a court order to stop using the name.  Possible relief also includes obtaining an order to transfer the domain name to the trademark owner, or statutory damages of up  to $100,000 for each domain name.

There are three requirements to bring an ACPA claim: 1) the trademark must be distinctive, famous or entitled to protection 2) the defendant’s domain name must be so similar that it would likely confuse the trademark owner’s customers and 3) the defendant obtained the domain name with a bad faith intent to profit from it.

Courts have used the following nine factors to make a determination of whether a domain name purchaser obtained the domain name in bad faith:

  • Whether the defendant owns a trademark in the domain name
  • Whether the defendant has used the domain name in actual commerce
  • Whether the defendant has a legal name corresponding to the domain name
  • Whether the defendant has made a fair use of the domain name in a manner outside of commerce
  • Whether the defendant registered the mark with the intent to, or is now using it to divert traffic from the trademark owner’s site to his own
  • Whether the defendant makes an offer to sell the domain name to the trademark owner
  • Whether the defendant provided misleading information when registering the mark
  • Whether the defendant has a pattern of registering trademarked names as domain names
  • Whether the mark allegedly infringed upon by the domain name is distinctive and famous under the Lanham Act. 15 U.S.C. §1125 (d)(1)(B)(i)

The ACPA is a federal law, which means it must be adjudicated in federal court. The cost of defending an infringement case in Federal court may cripple your startup if you don ‘t have the resources to do so. If you present the cease and desist letter to your attorney, and she feels that the trademark owner has a valid federal claim, it may be wise to give up at this point, unless you have thousands of dollars to defend an ACPA claim.

 

UDRP ANALYSIS

As previously mentioned, a cheaper, faster method of resolving domain disputes is through a UDRP proceeding. This is an arbitration proceeding that aims to resolve these disputes under ICANN policies. This proceeding is mediated by one of three arbitration providers and is done totally  online.

These 3 elements are required to bring a successful UDRP proceeding:

1)      The domain name is confusingly similar to a registered trademark

2)      The registered owner of the domain name has no rights to the name outside of the domain name

3)      The domain name was registered in bad faith and is being used in bad faith.

The UDRP analysis of bad faith is as folows:

  • The registrant purchased the domain name with the intent to sell it to the trademark owner
  • The registrant purchased the name to prevent the trademark owner from registering the domain name, and has done this before to others
  • The registrant purchased the domain name primarily to disrupt the others business primarily from a competitive perspective
  • The registrant is purposefully trying to attract users of the trademark owner’s website to his  by creating a likelihood of confusion  that the owner of the mark is endorsing, sponsoring, or affiliated  in some way with the registrant’s site.

DEFENSES TO A UDRP CLAIM

The registrant of a domain name that finds itself involved in a UDRP proceeding can assert any of the following defenses:

  • Registrant can show that it made preparations to use the domain name in connection with a bona fide sale of goods or services before receiving notice of the dispute. Iin other words, there was no bad faith on the registrant’s part.
  • The registrant can show that it was commonly known by the domain name even without registering the trademark with the PTO. This is what’s known as a common law trademark.
  • Registrant is making a legitimate non- commercial use of the domain name without the intention of making commercial gain or diverting the trademark owner’s users to the registrant’s site.

Defending a UDRP claim may be worth the risk. There are no court costs because the hearing is done online by filling out forms and handing them into the arbitrator. Both parties are informed of the result in an email from the arbitrator. It would still be advisable to retain a lawyer to defend your domain name, but at least you’d know that there is no risk of a long court battle that can raise your legal fees into unwanted territory.

.LIKELIHOOD OF CONFUSION

Since it is an element of both the ACPA and the UDRP, it is worth going through an analysis of what the law regards as a likelihood of confusion with respect to a trademark.

There is no set criteria that Courts use to assert whether there is a likelihood of confusion. Rather than use one standard, courts usually use a combination of factors to decide these cases.

  • The Strength of the plaintiff’s trademark
  • The degree of Similarity between the two marks
  • How close the two parties are operating to each other in relation to the other.
  • The likelihood that the Defendant will expand into the Plaintiff’s geographical territory
  • Any evidence of “Actual Confusion (emphasis added)
  • The Defendant’s intent when using the mark. In other words, did the defendant use it in good faith and with knowledge that the original mark was out there.
  • The quality of the Defendant’s product or service
  • The sophistication of the buyers.

Generally, courts will look at a combination of market factors to assess the likeklihood of confusion since there is no bright line test. A court or UDRP arbitrator will likely mainly look
the intent of the alleged infringer to deceive, and evidence of actual confusion.  For market factors, confusion is analyzed by considering “all of the circumstances involved in the marketing of the respective goods or services in the operation of t business.” This is very broad, and means that courts will they will compare how your company and the trademark owner’s conduct business.

Confusion can be inferred from proof that you, the domain name owner,  used a similar mark with the intent to cause confusion or deceive, but should not be inferred merely from your copying a mark if you had no intent to confuse or deceive the owner’s customers.

You can defend a likelihood of confusion claim by asserting that the owner of the trademark can’t produce evidence of actual confusion.  This defense will more likely prevail if the trademark owner can’t prove actual confusion, and both you the domain owner, and the trademark registrant have used the mark in the same territory for a substantial period of time. .

CONCLUSION

When choosing a domain name, it may be prudent to perform a trademark search beforehand. A  knockout search may cost as low as $300, which is relatively inexpensive in comparison to a court proceeding in Federal Court. This way, you can see if there is a trademark owner with deep pockets that can sue you just for the hell of it, and plan accordingly for when that date comes.

I remember in the early stages of the internet, cybersquatting was rampant, and there were many companies registering existing brands as domain names in an effort to extort the trademark owners into paying them to assign the domain name to the trademark owner. This surely had a hand in the government’s creation of the ACPA legislation, and ICANN’s creation of the UDRP process.

If you register a domain name with legitimate intentions, and are actually using it to sell something or create value for your company, you are more likely to prevail in defending your registration of the domain name. If you should receive a cease and desist letter after registering a domain name, get together with your attorney and analyze the facts behind the claim and have your attorney send a letter back to the accusing party. There is some risk analysis to be done especially if threatened with an ACPA suit. Depending on the possible outcome, it may be more prudent to find another domain name, but a lot of companies send cease and desist letters to frighten companies. If you have a strong rebuttal, many of them will walk away.

Patrick Marc, Esq. 

This post is purely informative in nature and is not intended to be construed as legal advice.

 

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