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Limitations, Delays, and Laches as Defenses in Cybersquatting Claims

In passing the baton for combating cybersquatting to the Internet Corporation for Assigned Names and Numbers (ICANN) the World Intellectual Property Organization (WIPO) recommended that “claims under the administrative procedure [should not] be subject to a time limitation” (Final Report, Paragraph 199). ICANN agreed and the UDRP contains no limitation period for making a claim. The absence of a limitation period does not necessarily forego applying equitable defenses for delay, but the consensus of Panels appointed to decide disputes under the Uniform Domain Name Dispute Resolution Policy (UDRP) is that they are not applicable in countering cybersquatting claims. This finds expression in many decisions, including for example Lowa Sportschuhe GmbH v. Domain Admin, Whois Privacy Corp., D2017-1131 (WIPO August 1, 2017) (<lowa.com> and Mile, Inc. v. Michael Burg, D2010-2011 (WIPO February 7, 2011) (Panels have “generally declined to apply the doctrine of laches.”) As a result, delay by itself does not support a defense per se to cybersquatting claims.

Rather, determining whether complainants “state a claim” depends on the factual circumstances each party marshals in support of its position. In Square Peg Interactive Inc. v. Naim Interactive Inc., FA 209572 (Forum December 29, 2003) (to take one of many examples) the Panel held that “[a]lthough laches by itself is not a defense to a complaint brought under the Policy, Complainant’s delay in seeking relief is relevant to a determination of whether Respondent has been able to build up legitimate rights in the Domain Name in the interim, and whether it is using the Domain name in bad faith” (emphasis added).

In a more recent case, the Panel in AF Gloenco, Inc. v. CT PACKAGING SYSTEMS, INC., FA1805001785831 (Forum June 28, 2018) (<shrinkfast.com>) held that the delay “has cemented Respondent’s business reliance upon the disputed domain name to conduct crucial online operations and constitutes an implied authorization for that use of the name by Respondent.” “Implied authorization” means “acquiescence” (an equitable defense) This holding is not alone. See also Wiluna Holdings, LLC v. Privacy.co.com, Inc Privacy ID# 1100134 FA1805001789612 (Forum July 16, 2018) () (“Respondent points to the nine-year delay in bringing legal proceedings. Therefore, the Panel may consider the doctrine of laches as additional evidence towards Respondent.”)

The issue of limitations, delay, and laches has become obsessive in some quarters urging a Policy amendment that would have the effect of limiting rights holders’ in UDRP proceedings to claims within a declared limitations period. But, what would that period be, and should there be one? Under U.S. trademark law (and this may be equally true of other jurisdictions) there is no explicit statute of limitations for trademark infringement or cybersquatting—when the need arises, federal courts refer to analogous state statutes of limitations in applying the corresponding presumption of laches. Analogous state statutes are either three or four years. For opposition and cancellation claims under the Lanham Act, it is five years (15 U.S.C. § 1064).

But whatever the limitation may be, it is not conclusive because the Lanham Act also provides for equitable defenses, even against marks that have become incontestable: 15 U.S.C. § 1115(b)(9) provides that a person’s right to a mark is subject to “equitable principles, including laches, estoppel, and acquiescence.” Courts apply laches to address the inequities created by a trademark owner who, despite having a colorable infringement claim, has unreasonably delayed in seeking redress to the detriment of the defendant. UDRP decisions can be cited in which Panels have applied equitable principles in response to persuasive facts, and when such facts are present Panels have been extra careful in explaining the legal basis for denying complaints even if it is not explicitly for laches.

Understandably, this does not give total comfort to registrants whose business model is monetizing and reselling domain names. No wonder they grow apprehensive when they see Panels awarding generic three-letter domain names to complainants. (The ADO case for example that I commented on in an earlier essay). Their anxiety is magnified each time a complainant is awarded a long-held domain name, even though some of these may incorporate marks higher on the protective scale. However, this is a business risk that is unlikely to change. There is some comfort in knowing that the consensus on laches is offset by a parallel consensus that unexplained delay will surely have consequences if either 1) complainant lacks proof the domain name was registered in bad faith, 2) the delay is unreasonable and unexplained, or 3) respondent rebuts the claim that it lacks rights or legitimate interests in the domain name.

In the recent dispute involving(<aquafx.com>, to take another example, Aqua Engineering & Equipment, Inc. v. DOMAIN ADMINISTRATOR / PORTMEDIA HOLDINGS LTD, FA1805001785667 (Forum June 25, 2018), Respondent vigorously argued that Complainant had the burden of explaining why it had waited so long citing numerous cases including Bosco Prod., Inc. v. Bosco email Servs., 94828 (Forum June 29, 2000) (“Without determining if the passage of considerable time would alone bar Complainant from relief in this proceeding, the Panel notes that Complainant does not explain why it has waited nearly four years to try and resolve [the domain name dispute].” As it happens, though, the decision did not turn on delay. The Panel denied the complaint for Complainant’s failure to pass the “rights” test).

It is a rule of economic life that what one party desires another party will object as adversely affecting its interests. These tensions between rights holders and domain name registrants have been around from the earliest deliberations for a supra-national arbitral process. The language of the UDRP is a compromise among competing interests. In anticipation of ICANN implementing the UDRP, rights holders and registrants sought concessions favoring their interests. Quoting from the ICANN Staff Report on Implementation Documents for the Uniform Dispute Resolution Policy, paragraph 4.1(c):

  • ”[Trademark owners] suggested that the definition should be expanded to include cases of either registration or use in bad faith, rather than both registration and use in bad faith.”
  • “Individual and non-commercial interests suggested changes in language that would narrow the scope of the definition of abusive registrations. They sought to restrict the scope of the examples of bad-faith practices in paragraph 4(b) and sought to expand the scope of the ‘legitimate use’ safe harbors in paragraph 4(c).”

ICANN Staff rejected both suggestions. The “and” stayed with the following response:

[the] WIPO report, the DNSO recommendation, and the registrars-group recommendation all required both registration and use in bad faith before the streamlined procedure would be invoked.” [Underlining of “and” in the original]

And, concerning expansion of the scope of the safe harbor defenses, ICANN Staff explained that,

it should be emphasized that the three circumstances described in paragraph 4(c) are not intended to constitute an exhaustive list of legitimate registration and usage of domain names. Even if none of the three listed circumstances is present, the administrative procedure would still not apply to a dispute where the domain-name holder can show that its activities are otherwise legitimate. (Emphasis added)

This tension between constituencies is very much alive in deliberations presently underway to consider whether ICANN’s rights protection mechanisms are functioning as intended. Will the Policy be rewritten to include a limitations period? I think it unlikely because Panels are capable of making determinations of parties’ rights and the jurisprudence is sufficiently mature to protect those whose rights or legitimate interests are challenged. But a lot depends on marshaling the right facts, and this is not a skill in every party’s or representative’s toolbox. See, for example, Leet Woodworking, LLC v. Zhong Jinzhang, D2018-1137 (WIPO July 10, 2018) (<boardstall.com>. “The Complainant brought no evidence showing previous or current sales of products under the BOARD STALL trademark. No evidence was proffered showing a website offering any products under the BOARD STALL trademark.”)

There is a substantial body of Lanham Act decisions denying complaints about unexplained or excessive delay. The factors isolated by judges are no less applicable to decision-making in UDRP cases. For laches to apply under U.S. trademark law the defendant must show (1) “that the plaintiff had knowledge”—actual or constructive—“of the defendant’s use of an allegedly infringing mark”; (2) “that the plaintiff inexcusably delayed in taking action with respect to the defendant’s use”; and (3) “that the defendant would be prejudiced by allowing the plaintiff to assert its rights at this time.” Chattanoga Mfg., Inc. v. Nike, Inc., 301 F.3rd 789, 792-793 (7th Cir. 2002). Determining parties’ rights “requires a qualitative examination of the parties’ words and conduct and an equitable evaluation of the length of the delay and the degree of prejudice to the defendant if the trademark owner’s rights are enforced,” which “generally requires a factual record.” Hyson USA, Inc. v. Hyson 2U, Ltd., 821 F.3d 935, 941 (7th Cir. 2016). Paragraph 4(c)(i) of the Policy embodies part of this concept, “[b]efore notice” but the “prejudice” element must be proved.

This is not to minimize registrants’ anxieties over potential unfair decisions transferring long-held domain names acquired for their inherent value. (The long-term holding issue has not emerged thus far with the Uniform Rapid Suspension System because new gTLDs only began arriving in the market in 2013—there has not been enough elapsed time). As already noted, the outcome in the ADO case (to take one example currently pending in federal court for a declaration under the ACPA) only heightens investor insecurity, although the incidence of divestment is extremely low. Nevertheless, some Panels may find bad faith in registering domain names composed of random letters and common terms regardless of the length of time held. As the time of holding continues to lengthen, it is likely that more long-held domain names will be challenged. Whether they are forfeited to complainants depends on the factual matrix.

Nevertheless (and recognizing there are exceptions) UDRP Panels take into account the same factors examined in federal actions in determining parties’ rights. Because the stakes are so high, domain name holders must learn what Panels expect from them. If Panels have to make “qualitative examination” it presupposes domain name registrants build a record, but in many cases, they default and their silence condemns them. I am thinking of the IMI case, acquired 23 years earlier than the complaint, and there are other examples. Unless registrants curate their websites shrewdly and understand the evidentiary demands for rebutting or proving their rights they will be vulnerable to losing their assets.

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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