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Challenging UDRP Awards in Federal Court: Recent Outcomes

Challenging UDRP awards in actions under the Anticybersquatting Consumer Protection Act (ACPA) is infrequent though steady. There are currently a number of court filings in U.S. district courts that are in the early stages, most notably the ADO.com case reported on in an earlier essay and several others have either been referred to mediation (the IMI.case) or settled or discontinued. Federal decisions adjudicating trademark infringement under the Trademark Act of 1946 (as amended), the Lanham Act where the marks postdate domain name registrations are more of a rarity, but there is one to report. Whether by trial, summary judgment, Consent, or Default Judgment the results are instructive in two ways: first, in understanding the principles and factors panelists and judges apply in determining parties’ rights to domain names; and second, in educating parties about their evidentiary burdens in both fora. I have dealt with some of these issues previously in Post-UDRP, ACPA Actions Challenging Awards.

Here, I will report briefly on three recent outcomes, one by the rights holder for trademark infringement instead of cybersquatting, Dealerx v. Kahlon, 2:17-cv-1444 (E.D. Cal., November 22, 2017) challenging the award in DealerX v. Gurri Kahlon, ROiQ.com, D2017-0488 (WIPO May 4,2017) (<roiq.com>); and two by domain name holders for declarations that their registrations were not unlawful: Kyle Burns v. Connecting Open Time, LLC, 17-cv-00840 (D. Arizona, July 27, 2018) challenging the award in Connecting Open Time, LLC v. Domains By Proxy, LLC / Kyle Burns, D2016-2328 (WIPO February 27, 2017) (<opentime.com>), and Direct Niche, LLC v. Via Varejo S/A, 15-cv-62344 (S.D. Fla., August 10, 2017), affirmed (11th Circuit August 3, 2018) challenging the award in VIA VAREJO S/A, v. Domain Admin, D2015-1304 (WIPO October 17, 2015) (<casa bahia.com>).

The Court noted in Dealerx that while “it does not have to credit the findings of the UDRP decision, [it] is in agreement that the facts do not support a finding of bad faith in relation to defendant’s initial acquisition of the ‘roiq’ domain name.” Bad faith registration would have been impossible to prove because the domain name registration predated the mark. Rights holders of marks postdating registration of domain names have no actionable claim under the UDRP and lack standing to maintain an ACPA action, thus their only recourse (if they have one at all) is to state and prove a claim for trademark infringement.

Ironically, Dealerx prevailed in federal court because the domain name holder created the circumstances that led to its losing the domain name. (In fact, defendant must have realized it had no defense to trademark infringement and saw no point in making an appearance. The judgment was entered on default). If only the defendant had continued using the domain name as it had before it learned of Dealerx there could not have been a claim for trademark infringement. The self-destruct happened this way: “upon learning of plaintiff’s mark” it attempted “to improperly extract profit from plaintiff.” Dealerx proved its case by

submission of an e-mail chain between plaintiff and defendant showing defendant attempting to extract a high price from the plaintiff for purchase of the domain name… Defendant further demonstrated bad faith by asserting that he tried to create consumer confusion by placing content on the website associated with his infringing domain that mirrored the plaintiff’s business model… Defendant’s actions after being made aware of his infringement are relevant to the bad faith analysis.

The takeaway here rights holders’ alternative to taking possession of an infringing domain name. Holders can be dispossessed under the Lanham Act (rather than the ACPA) if the domain names can be shown to be infringing mark owners’ statutory trademark rights. In Dealerx, the Court granted a permanent injunction, transfer of the domain name, and attorney’s fees.

The other two cases were adjudicated under the ACPA. First, Connecting Open Time. In that case, the parties agreed to a Consent Judgment as follows:

Defendant [the prevailing party in the UDRP proceeding] admits that (1) Plaintiff’s registration and use of the domain name “opentime.com” is not unlawful under the ACPA, 15 U.S.C. §1124(d); and (2) Plaintiff’s registration and use of the domain name “opentime.com” does not constitute a bad faith intent to profit from any mark alleged to be owned by Defendant under the ACPA, 15 U.S.C. §1124(d); and 3. Plaintiff is not required to transfer to Defendant the registration for the domain name “opentime.com.”

While it is not possible to know the reasons for settling, when the prevailing party in a UDRP is willing to concede to a declaration of lawful registration it is not unreasonable to infer it has assessed the risk of defendING the ACPA action—the risk being damages (up to $100,000) and attorney’s fees. Hidden from view in Connecting Open Time is Defendant’s counsel’s calculation of the merits of its client’s superior right to <opentime.com>. (While settlements add nothing to the jurisprudence, the terms agreed upon can be instructive to parties similarly situated).

When parties agree in a Consent Judgment to, in essence, annulment of the UDRP award, a question could be asked whether the UDRP Panel was “wrong” in its assessment of rights. An award that favors the mark owner which is thereafter reversed or canceled is not “wrong” unless the record was crystal clear in Respondent’s favor. The problem sometimes, and certainly in the <opentime.com> dispute, is the state of the record. If respondent’s representative does less than a stellar job in presenting a defense, as appears to be the case in this dispute, the balance will shift in complainant’s favor. In <opentime.com> the Panel noted

Given the misrepresentations, conflicting and unsubstantiated statements, and lack of explanations by Respondent, this Panel based on the evidentiary record place before it, has doubts about the credibility of Respondent’s claim of prior use of OPEN TIME and thus concludes that Complainant has prior and superior rights in OPENTIME.

This is a cautionary reminder to defense counsel to pay attention to and learn from such admonitions what is expected of them in so far as mounting a defense. Credibility can be a significant factor in determining rights. In the ACPA lawsuit, Kyle Burns was represented by competent counsel; and to its credit, so was the Defendant.

In Via Varejo Respondent in the UDRP proceeding and defendant in the ACPA action also lost on a record. It was simply unable to rebut the facts of infringement or articulate a legal theory supporting its defense. The district court in Direct Niche, LLC held that “t is clear to the Court that Direct Niche intended to profit from prospective Via Varejo customers who are unaware that Via Varejo’s Casas Bahia website is found, not at casasbahia.com, but at casasbahia.com.br”). The factual question is, how does a Brazilian company have rights in an unregistered mark in the U.S.? The Court of Appeals for the Eleventh Circuit explained that it was because

Via Varejo used the Casas Bahia service mark in commerce in the United States [thus satisfying the requirement that it prove secondary meaning]. The [district] court based its finding on evidence that Via Varejo contracts with U.S. companies to provide advertising of their goods on the Casas Bahia Website, both through preferred product placement and the banner ad program. These advertising services are rendered on the Casas Bahia Website in conjunction with the Casas Bahia mark. Moreover, Via Varejo’s marketing director testified to his personal knowledge that the Casas Bahia Website receives millions of visits every year from IP addresses located in the United States. The district court’s conclusion that this evidence demonstrates sufficient public use in commerce to establish ownership of the mark is not clearly erroneous. Accordingly, we affirm.

In contrast to Dealerx whose mark postdated the registration of the domain name, Via Varejo proved it had standing under the ACPA because its unregistered mark predated the registration of the infringing domain name. The Court found the evidence copious in plaintiff’s favor.

Domain name holders should take note, they are vulnerable to losing their domain names if sufficient and unrebuttable evidence is marshaled to prove a case of abusive registration (UDRP) or bad faith use (ACPA)

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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