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Exploring the Meanings of “Right” and “Legitimate Interest” (UDRP Proceedings)

For complainant, the second leg in determining cybersquatting under the Uniform Domain Name Dispute Resolution Policy (UDRP) is evidence respondent lacks both rights and legitimate interests in the challenged domain name (Paragraph 4(a)(ii)). I underscore “both” because proving one but not the other is not good enough. This seems obvious, so why suggest there is something to explore about “rights” and “legitimate interests” if their meanings hardly need explication?

Of course, where cybersquatting is evident (which is true in 90+% of the cases), distinguishing a “right” from a “legitimate interest” is inessential because respondents have neither the one nor the other. Still, where the record is sufficiently developed, it matters whether a respondent has a right or a legitimate interest, and what it has (or does not have) should be clearly spelled out. Whether the respondent appears or not—it defaulted in SHL Medical AG v. Jacobus Petrus Elisabeth Antonius Swalen and Jacques Swalen, SHL Technologies, D2020-2333 (WIPO November 24, 2020)—complainant succeeds only if it presents an unrebutted prima facie showing that respondents lack both rights and legitimate interests. Respondent succeeds on its rebuttal burden if it has either, and if one or the other or both the complaint must be dismissed. In SHL Medical, the record harbored sufficient evidence to undercut Complainant’s prima facie case and the complaint was dismissed.

The WIPO Overview 3.0, section 2.11 asserts “that Panels tend to assess claimed respondent rights or legitimate interests in the present, i.e., with a view to the circumstances prevailing at the time of the filing of the complaint.” The Panel in Micros Systems, Inc. / Oracle International Corporation v. Jaron Hunter, FA2007001904194 (Forum August 18, 2020) takes this to mean that “a Respondent must show that its current use of the domain name is in connection with a bona fide offering of goods or services” (Panel’s emphases). In other words, regardless of what right and what legitimate interest the respondent may have had in the past, if it does not continue to the present, the respondent can claim neither one nor the other. Both section 2.11 and the Panels generally are reassuring that past rights and legitimate interests count in determining the third leg, bad faith registration and use, which (for domain name investors) is comforting.

Where the record is sufficiently developed, the determining factor concerns respondent’s use of the domain name (subparagraphs 4(c)(i) and (iii)), the former in connection “with a bona fide offering of goods or services.” Subparagraph (ii) is defense of a right. Panels have construed “bona fide” to include resellers of domain names, and where the challenged registrations are unquestionably non-infringing, respondent has a legitimate interest; but do they also have a right? And if a right, what kind of right? It is not the kind of right noted by the Panel in BRH International Inc. v. Mira Hold / Mira Holdings, Inc., FA2010001918789 (Forum December 14, 2020) (<hemper.com>) who held that “Respondent, had the right [my emphasis] to register a domain name containing [a descriptive term], subject to the proviso that it may not be used to invoke a trademark or engage in untoward conduct against, or to target, a trademark owner.” This respondent certainly has a legitimate interest.

I do not think anyone will dispute that it is indisputably correct that respondents have a general right to acquire dictionary words for their semantic meanings and can resell them for branding purposes. But, at the same time, it is equally correct that that right is not a “legal right”; it is something less than that. Rather, it is a contingent right for the very reason the Panel explains in its proviso. As long as the domain name is not being used in violation of a trademark owner’s right, even though its interest is contingent, it cannot be deprived of the domain name.

Stated in this way, it is understandable that legitimate interests must be current, but it must also be acknowledged that resellers of domain names (subject only to the contingency) have legitimate interests simply by virtue of their business model. Having something less than a right, though, should work no hardship on investors, but it does (I think) require a skillful degree of alertness that any use of the domain name be properly curated. The difference between a legal right and a contingent interest is illustrated in a number of cases in which the complaints were dismissed in the UDRP proceeding but succeeded in federal court under the Anticybersquatting Consumer Protection Act (ACPA). My favorite is <justbulbs.com>, Superiority, Inc. d/b/a Just Bulbs v. none/Mother boards.com, D2003-0491 (WIPO October 9, 2003). Complainant’s claim was heard and denied twice, the second time in 2013. “Just bulbs” standing alone is a generic phrase, but when it is used to target the trademark, domain name holder’s interest evaporates. When in a later stage of the dispute, the mark owner moved for summary judgment under the ACPA, the domain name holder forfeited its registration to the mark owner (2017).

One further illustration: in Mercury Luggage Manufacturing Company v. Lisa Katz / Domain Protection LLC, FA1904001838010 (Forum May 14, 2019) the Panel properly dismissed the complaint. It found that respondent had a legitimate interest in <sewardtrunk.com> because it pre-dated the mark, although clearly infringing. The Panel held that “significantly, Complainant provides no evidence that its secondary meaning pre-dates the registration of the disputed domain name,” yet in the subsequent action under the ACPA, Mercury Luggage Mfg. Co. v. Domain Prot., LLC, Civil Action No. 3:19-cv-01939-M, at *18 (N.D. Tex. Dec. 4, 2020), the court granted summary judgment transferring the <sewardtrunk.com> to the mark owner. Correctly in Mercury Luggage the Panel dismissed the complaint because although Complainant had a current trademark its mark postdated the registration of the domain name; equally correctly, <sewardtrunk.com> was forfeited under the ACPA.

In contrast it would seem logical that a person who has a “right” (that is, a legal right) has a vested interest in the subject matter. The BRH International Respondent falls short of this even though it has a legitimate interest, which raises the interesting question: What is a legal right? Take a what-if circumstance: <hemper.com> is acquired by a company to market goods or services in different classes than a mark-owner complainant, but market conditions compel it to discontinue its business. Does it no longer have “rights or legitimate interests” because its use is not current? Before I answer this, consider some past thoughts on the issue.

The Panel in International E-Z UP, Inc. v. PNH Enterprises, Inc., FA0609000808341 (Forum November 15, 2006) (<ezup-canada.com>) explained the difference between “right” and “legitimate interest” as follows: “[t]he intention was that, first, if the registrant had an actual legal right to the domain name, that would defeat the trademark owner’s claim by itself. But, secondly, the Policy went further and added another criterion, that of legitimate interest.” Words chosen with care “have to be given some work to do or they serve no purpose.” The Panel continues,

[t]he intention here was to cover cases where the registrant may not have a legal right, but where it nevertheless has a bona fide association or connection of some sort with the domain name, where for example ‘... respondent has not registered the domain name for merely speculative reasons ...’

In other words, once a respondent shows it has legal right, that ends the enquiry on that issue, but if does not have a right the enquiry continues to determine whether respondent has a legitimate interest. If one has a legal right, surely it endures beyond nonuse, otherwise why call it “legal”? To call it such aligns domain names with the concept of trademark abandonment, which it most decidedly is incorrect, although this is the conclusion suggested by the WIPO Overview.

This is illustrated, for example, in ELCOMAN Srl v. Marc Ellis, D2020-1628 (WIPO September 7, 2020) (<kobra.com>). Here, the Panel citing the “consensus” position advocated in the WIPO Overview concluded that “the Respondent has not made such use of the Domain Name since [it acquired it for its business] . . . and does not demonstrate plans to do so in the future. The Panel follows the consensus view that the Respondent’s rights or legitimate interests must be present ones which can be established at the time of the proceeding.” The problem with this position is that it affirms that a legal right is equally contingent with a legitimate interest, whereas a legal right once vested should be irreversible.

The Panel in Tecme S.A. v. Stephen Bougourd, D2020-2597 (WIPO November 24, 2020) reached a similar result. It concluded that while the “Respondent plausibly recounts that he acquired the Domain Name [<techme.com>, a coined word] as the abbreviated form of a business name that he registered in 1996 . . . it does not appear that he has [used it] since 2005.” The Panel continues: “[i]f he were still using that business name, this would likely suffice to establish his rights or legitimate interests in the Domain Name,” but “[i]t is generally held that the Respondent’s rights or legitimate interests must be current at the time of the UDRP proceeding.”

While these Panels reached the right conclusion on the third limb and dismissed the complaints, they failed to recognize that the right Respondents acquired for their operating businesses were legal rights. A federal case supports this difference. Southern Grouts & Mortars, Inc. V. 3M Company, 575 F.3d 1235 (11th Cir. July 23, 2009) where the domain name is recognized as a corporate asset. So too are <kobra.com> and <tecme.com> in the context in which they were challenged.

Closer to this position is the decision in American Honda Motor Co. Inc. v. Piazza Management Company, FA2010001917164 (Forum December 7, 2020). Here the Panel found that while Complainant’s mark pre-dated Respondent’s domain name, Respondent also had a registered mark that matched <wrighthonda.com>:

Complainant contends in its supplemental submission that any rights Respondent had in the WRIGHT HONDA mark have been abandoned due to lengthy disuse. This argument fails for two reasons. First, even under applicable trademark law, Respondent fails to meet the high burden to show trademark abandonment. The record suggests that Respondent has continued to make some uses of the term WRIGHT in connection with its Honda automobile sales, as the name of one of the founders, owners, or affiliates of Respondent, up to and including recently. Secondly, trademark abandonment, even if shown, does not retroactively render a good-faith domain name registration improper.

The Panel in SHL Medical mentioned above reached a similar conclusion. Even though Respondent defaulted in appearance, the record was sufficient to establish that it used or had used <shltechnologies.com> in connection with an ongoing business, and thus had a right and a legitimate interest in the challenged domain name.

Both these results are different from the kind of “right” the Panel is referring to in BRH International but I point it out because it emphasizes the difference between a legal right and a contingent interest. In other words, the BRH Respondent has a right to register the domain name, but if its use were ever questioned for contravention of a trademark owner’s right under the UDRP for cybersquatting or the Lanham Act for trademark infringement and cyberpiracy, it will forfeit the domain name.

There is, I think, generally among panelists, a tendency to treat rights or legitimate interests as being terms marking the same concept, as two sides of the same coin. But this is clearly not the case. When I say the issue is not settled I am referring to earlier cases in which Panels were grappling with the issue. The distinction between “legal” and “contingent” is nicely captured in Media General Communications, Inc. v. Rarenames, WebReg, D2006-0964 (WIPO September 23, 2006) (<wcmh.com>):

If the Respondent registered and used the Domain Name, and offered it for sale, in good faith, then we must conclude that the Respondent had a legitimate interest in the Domain Name as it does in hundreds of thousands of other domain names in its portfolio. On the other hand, if the Respondent failed to act in good faith, by registering and using a non-generic domain name that it should have realized was likely to correspond to a trademark, then the Respondent has no legitimate interest in this particular Domain Name.

Only where there is no legal right does legitimacy become an issue and if that question is unresolved, if the answer “largely hinges on the question of bad faith,” it will be considered under the third limb of the Policy.

In Riveron Consulting, L.P. v. Stanley Pace, FA1002001309793 (Forum April 12, 2010) (<riveron.com>) the Panel explained that

[t]o prove . . . that Respondent lost any rights it might have had . . . Complainant must at least suggest some circumstance which divested Respondent of its rights and interests in the domain name since such rights and interests are acquired at the time of registration, by the fact of registration, and are maintained by conduct consistent with the terms and conditions of the registration agreement.

In practice, a present right to a domain name under paragraph 4(c)(i) is found in either one of two circumstances: first, where the domain name is (and has been) used functionally as a trademark and the respondent is the senior user ((Soft Trust Inc. v. Todd Hinton, Ikebana America LLC, D2020-2640 (WIPO December 4, 2020) (<ecourier.com). In Soft Trust, while the Panel found that Respondent had both a “right” and a “legitimate interest”, the “right” is emphatically the predominant factor:

The facts at hand do not align neatly with one of the scenarios enumerated in paragraph (c) of the Policy. However, these scenarios are non-exhaustive and on balance, the Panel finds that the Respondent has established rights or legitimate interests in the Disputed Domain Name.”

Also: Gapardis Health and Beauty, Inc. v. Frantz Boulos, FA2010001917653 (Forum November 23, 2020) (<minoplus.com>. “Respondent has come forward with evidence that he owns rights in the corresponding mark (MINOPLUS) in Haiti; that he owns and uses similar marks (MINOVAL and MINOVAL PLUS) for similar products in Haiti and (through a licensee) the United States; and that his use of the marks pre-dates any use by Complainant or its predecessors of the MINO PLUS mark.”). Also to be mentioned: Ternio, LLC v. Domains by Proxy, LLC / Sedo GmbH, D2020-2215 (WIPO November 16, 2020) (<blockcard.com> in which the Panel held that “[t]he evidence filed by the Respondent makes clear that the Respondent independently devised such a plan and it chose the name ‘Block Card’ for that project. It did so prior to the Complainant filing its application for the BLOCK CARD trademark.”)

Respondent also has a right (together with a legitimate interest) where it has registered the domain name prior to the existence of complainant’s mark. One of many illustrations of this is JumpCloud, Inc. v. Peter Irion / SCS LLC, FA2009001914971 (Forum November 27, 2020) (<jumpcloud.net>). In all these cases in which respondent is found to have a “right” it also has a “legitimate interest.” As I noted above, this is so because the logic dictates that where a party has a right, it must also have a legitimate interest. It contrasts with a situation in which the respondent’s interest is contingent on proving that it has a legitimate interest.

Importantly, what I have called a contingent interest, for as long as the holding remains lawful, the holder has all the benefits of a right as conceived by the Ninth Circuit Court of Appeals, that the domain name is alienable. GOPETS Ltd. v. Hise, Digital Overture, Inc., 657 F.3d 1024, 1032 (9th Cir. 2011) (“Nothing in the text or structure of the statute indicates that Congress intended that rights in domain names should be inalienable.”) The point is emphasized in Picture Organic Clothing v. Privacydotlink Customer 4032039 / James Booth, Booth.com, Ltd., D2020-2016 (WIPO October 5, 2020) (<picture.com>) in which the Panel notes that “the fact that Respondent has listed the disputed domain name for sale without more does not in and of itself prove a lack of legitimate interest.” It affirms that respondent retains control of the registration, which is all it should care about.

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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