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What’s So Outrageous Asking High Prices for Domain Names?

Update: Respondent in the UDRP discussed in this essay challenged the award in federal court transferring the domain name to Complainant and the parties settled. The terms are discussed in Prudential Settlements for Alleged Cybersquatting/ Reverse Domain Name Hijacking Under the ACPA.

Panels appointed to hear and decide disputes under the Uniform Domain Name Dispute Resolution Policy (UDRP) have long recognized that three letter domains are valuable assets. How investors value their domains depends in part on market conditions. Ordinarily (and for good reason) Panels do not wade into pricing because it is not a factor on its own in determining bad faith.

That is why a Panel of distinguished members’ decision to transfer <ado.com>—Autobuses de Oriente ADO, S.A. de C.V. v. Private Registration / Francois Carrillo, D2017-1661 (WIPO February 1, 2018)—received what in polite society is known as a “Bronx Cheer.” Morgan Linton headlined: “ADO.com is lost in a UDRP due to its $500,000 price tag the same day DAX.com sells for $500,000.” Andrew Allemann’s blunt comment in DomainNameWire was “WIPO panel screws Domaining.com owner Francois Carrillo out of Ado.com” (explaining that the Panel gave improper weight to the price). And Raymond Hackney declares that “The ADO.com decision brings up another potential problem” (referring to the logo analysis that the three-member Panel found persuasive in reaching its decision).

The single most prominent reason long-held domain names are lost is the failure to properly curate (by which I mean populating the website with bad faith content from which registration in bad faith can be inferred). Price is not a factor for bad faith without concrete proof of the 4(b)(i) elements, yet in Autobuses de Oriente price was elevated as a prominent factor. The Panel also condemned Respondent because it was passively holding <ado.com> and offering it for sale on a page that included other domain names each with a designed logo. Passive holding, too, a not a factor when considered alone; but when combined with other factors bad faith registration can be inferred.

Does the Autobuses de Oriente decision deserve the universal condemnation it has received? (The three industry bloggers noted above are of the view the Panel put their combined fingers on the scale, and I think that criticism is fair). What constitutes concrete and “fake” evidence is worth exploring because it makes investors (large and small) of random letter domain names vulnerable to Complainants who claim the letters are not random but infringing.

No doubt, this is a difficult area for Panels. 2017 saw some notable decisions on three-letter domain names, going both ways. <Imi.com> was lost, but <dll> was not. What we know from the summary of the record in Autobuses de Oriente is that Respondent acquired <ado.com> in 2012 from an earlier holder whose website (allegedly) contained infringing links to transportation. Ordinarily, a successor is not held responsible for its predecessor’s conduct, as long as it does not continue the bad faith after its acquisition (my emphasis). Here, the Panel conjectured that even if Respondent did not know of Complainant’s (allegedly) “famous” mark, it was guilty of “willful blindness”:

[It] does not excuse willful blindness in this case, as it seems apparent from the record that even a cursory investigation by Respondent would have disclosed Complainant’s mark especially given the use made of the Domain Name of which Respondent was aware when negotiating for the Domain Name.

But, what would a “cursory investigation” have revealed? Well, it would have revealed that the website contained links to transportation, but up to that point in time there had been no UDRP claims from Autobuses de Oriente, so why would an investor (or any ordinary registrant for that matter) “know” that the links were infringing? To have determined that the domain name violated anyone’s statutory rights would have required a deeply focused investigation. It is a fundamental principle of UDRP jurisprudence that registrants are not condemned for failing to research whether second-level domains violate third-party rights.

Regrettably, the distinguished Panel failed to examine the evidence carefully. Of course, Complainant would not admit 1) it was one of close to a hundred companies that use the ADO mark alone or combined with other words in various designs and logos; 2) it has no particular fame except in Mexico (notwithstanding the bogus reference to a country code decision); and 3) many other companies highlight their ADOs in red. The Panel bought the presentation (which I have to admit is very good) hook, line, sinker. As far as investors are concerned, ADO is an attractive three-letter string. There would have been no clues that five years after its acquisition a minor Mexican corporation in the transportation business would jump on it with a bogus claim of infringement. The decision (frankly) makes no sense! (This is one good reason for there to be an administrative appeal built into the UDRP process).

If the standard for judging bad faith were what a “cursory investigation” reveals, then no investor of short letter strings, dictionary words, common phrases, etc. would ever be safe. The Panel (1) did not know the Complainant lied that it had a U.S. trademark (its two trademarks have been dead since 2007); 2) it bought into the assertion that a single country code decision that Complainant’s ADO mark was “famous” translated into International fame, and that fame is achieved by having a couple of EU trademarks and dead US marks; and 3) and paid no attention to the fact there are numerous ADO logos in all kinds of designs that are highlighted in red. The fact that Respondent designed a red logo as a selling tool that Complainant claims is so similar that it supports cybersquatting is laughable! But, the Panel bought it!

Assume for the moment Respondent knew (or suspected) there was a Mexican company with an ADO mark, but nevertheless (because he noticed it was popular in the marketplace) saw an opportunity to acquire a valuable three-letter domain name that was marketable to numerous business already operating or who would find it attractive in the future. We already know that almost a hundred companies have already found it attractive. Instead of assuming Respondent knew about Complainant, assume he knew there were numerous companies using that name and he thought to himself “Hmmm, if so many companies already use ADO maybe it would be a good bet that others will come along in the future.”

The USPTO database reveals for ADO there are 7 live registrations (none by Claimant) and 2 dead (both by Claimant). In the EU database, there are 74 registrations for ADO, of which numerous are red colored logos comprising letter or acronym marks. I will return to this in a moment. First, about lying where the signatory certifies, it is telling the truth. Panels are at a disadvantage unless brought to their attention that a party is lying. Panels are at a disadvantage unless brought to their attention that a party is lying. (Rule 3(b)(xiv) for complainant and 5(b)(viii for respondent requires certification that the statements are truthful). When the certification is made by prominent and well-respected counsel, and lies have not been detected, Panels accept the allegations because of the source of the certification. (This should be a lesson the respondents to be careful when responding to complaints, namely “check the facts”). But, acceptance of a lie does not convert it into truth.

Unfortunately, the Panel in Autobuses de Oriente was also persuaded by false facts masquerading as elements (namely prices) and by incoherent reasoning of similarity of logos. Triers-of-fact have to be careful to avoid adopting subjective inferences. How does a trier-of-fact distinguish subjective (proposed inferences) from objective (measurable) facts?

Let me deal first with prices: (not surprisingly) trademark owners have for the twenty years of UDRP’s existence formed a chorus condemning prices of domain names corresponding to their marks as being “unreasonable,” “exorbitant,” “outrageous,” “disproportionate,” “excessive,” and “high.” For Autobuses de Oriente $500,000 was “outrageous.” But, as Mr. Linton noted, on the same day the Panel ruled for Autobuses de Oriente another 3-letter domain was sold for the same “outrageous” price. It should not be a Panel’s role to determine that a price is too high or to accept a complainant’s statement that it is disproportionate to other domain names held by an investor, but that is precisely what the Complainant argued, and the Panel accepted, as though true:

In view of this current use of the Domain Name, which it is offered for sale at a price of USD 500,000, far in excess of Respondent’s purchase price and, moreover, as compared to other similar three or four letter domain names in Respondent’s portfolio (which were listed at a vastly lower sum), the Panel determines that the Domain Name is being used in bad faith.

Significantly (although not mentioned by the Panel) was that at the time Respondent purchased <ado.com> there was no claim it was an infringing domain name. If there had been demands from Autobuses de Oriente and Respondent knew that a particular mark owner was complaining about the infringing PPCs or Complainant was the only business with the ADO mark it would be understanding that the domain name be forfeited. But that Complainant was one of a hundred; that’s absurd! From this “fact” (that Respondent must have known the content was infringing), the Panel concluded Respondent was guilty of “willful blindness.” (As an aside, it could be suggested that the epithet is more properly applied to the Panel!) And, from this finding, the Panel drew its extraordinary conclusion that Respondent registered and was using the domain name in bad faith and gave it to Complainant.

The decision in Autobuses de Oriente for all its seeming scholarship and lawyer-like analysis is badly reasoned, accepted Complainant’s “facts” as true and produced a decision that is inconsistent with UDRP jurisprudence. For reasons I think I can understand, the Panel was mesmerized by Counsel’s brilliant (illusionist) performance in hiding the duplicity of Complainant’s argument on prices and its totally bogus analysis of icons.

Complainant alleges (as summarized by the Panel):

The website to which the Domain Name resolves features a logo that prominently displays Complainant’s ADO trademark in red capital letters, similar to the distinctive and famous features of Complainant’s mark, along with the phrase “Do you like this domain? Make an offer!’‘, thereby communicating that the Domain Name is being auctioned for sale or rent.

(As an aside, the allegation that Complainant’s mark was “distinctive and famous” is itself bogus. It comes from a ruling in an .mx country code dispute, so its “fame” has never been recognized Internationally; and whatever “fame” it may have is merely territorial. It has no fame in the U.S. where it has no trademarks). In fact, Complainant had no trademarks in the EU that predated Respondent’s registration of <ado.com> (private discussion with Zak Muscovitch, Respondent’s counsel).

Turning to the logo analysis. Complainant argued and the Panel accepted without demur that Respondent’s design was (allegedly, on its face no less!) “similar to the distinctive and famous features of Complainant’s mark.” Hogwash as I have heard is said in polite society! Are they really? This is what Complainant offered as proof:

By making the making the logos the same size Complainant creates the illusion they are more alike than they really are. The sizing is a litigator’s artiface. Do these logos resemble each other because they are both colored red? Is it really an objective view to say that the designs are alike, when to me they are completely different in design! A review of EU trademarks shows 74 registrants of ADO, many of them with logos and many distinguished by being designed with red or mixed color highlighting. I have selected several of the red logos not owned by Complainant (the search was made in Europa Search Availability):

These various ADOs are registered by businesses other than Complainant’s. In the U.S. there is:

Does complainant claim a monopoly on the red coloring as well as the three-letter string? Obviously not! However, the madness of the method is that Complainant has recently registered (May 7, 2017) a new trademark indicating an enlargement of its market:

What more perfect ploy than to allege that an earlier registered domain name corresponding to the mark that is now going “Global” is cybersquatting! What is apparent is that Respondent’s design is simply a design among many possibilities. Complainant offered several more examples of designs (allegedly) “similar” to other marks for short string marks in Respondent’s inventory. These other examples are similarly subjective assessment, but the Panel bought it with the result that it forfeited ADO to Complainant. (See my note on bias below).

This case is a perfect candidate for an action under the Anticybersquatting Consumer Protection Act. (NOTE: A UDRP award is not an “arbitration” as envisioned by the Federal Arbitration Act Parisi v. Netlearning, Inc. 139 F. Supp. 2d 745 (E.D.Va. 2001), but if it were the issue of bias would be a reason for vacating the award. Although UDRP panelists certify they have no conflict of interest (which they may not with regard to the particular matter for which they are being appointed), however, bias is nevertheless present where panelists are active in representing clients who would benefit from a decision in favor of trademark owners).

By Gerald M. Levine, Intellectual Property, Arbitrator/Mediator at Levine Samuel LLP

Information about the firm can be found on the Firm’s website at iplegalcorner.com. Mr. Levine has a litigation and counseling practice representing clients in Intellectual Property rights and management, Internet and Cyberspace issues, domain names and cybersquatting, as well as a diverse range of legal and business matters from working with client to resolve commercial disputes, to copyright and trademark counseling and registrations. He is the author of a treatise on Trademarks, Domain Names, and Cybersquatting, Domain Name Arbitration: A Practical Guide to Asserting and Defending Claims of Cybersquatting Under the Uniform Domain Name Dispute Resolution Policy. A Second Edition of the treatise was published July 2019 and is available from Amazon or from the publisher, Legal Corner Press (LCP). For inquiries to LCP write to .(JavaScript must be enabled to view this email address) or Mr. Levine at .(JavaScript must be enabled to view this email address).

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The facts of this case suggest the Charles Christopher  –  Feb 12, 2018 10:23 PM

The facts of this case suggest the domain name was available to steal because a domain investor had registered it.

Should brand “owners” continue to have their way, and domain investing is no longer possible, their cost of acquisition will increase EXPONENTIALLY. Some useful food for thought.

Be careful what you wish for .....

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