I have pointed out in earlier posts that some panelists disapprove of the business of speculating in domain names. There have been a succession of decisions expressing this view beginning with <crew.com> discussed below. Forfeiture has been justified with a mixture of theories. If the offering price is allegedly “excessive” or the domain name is passively held, or the respondent has renewed its registration after the mark is first used in commerce, the panelists find respondents have engaged in unlawful conduct and must forfeit their domain names.

These views are eccentric: they depart from consensus and are out-of-step with the established jurisprudence of the UDRP. In an early case, it may be recalled that the majority stated in rebutting the dissent that decisions “should consist of more than, ‘[i]t depends [on] what panelist you draw.’” The goal (as stated in many UDRP decisions) is achieved through “a strong body of precedent,” which “is strongly persuasive,” even if not binding. Nevertheless, some panelists continue to hold these retrograde views, and it should surprise no one that they can find decisions supporting their conclusions.

It is useful to take note that speculation as an economic model in business is not viewed as unlawful conduct. Far from it. Speculation is a form of arbitrage. It was noted in a 1996 trademark infringement case, Intermatic Inc. v. Toeppen, 947 F. Supp. 1227, 1230, 1234 (N.D. Ill. 1996), that “[o]ne of [the defendant’s] business objectives is to profit by the resale or licensing of these domain names, presumably to the entities who conduct business under these names.” In short, the Court held that the defendant “arbitrag[es] the ‘intermatic.com’ domain name.” While the Court found this particular defendant liable for cybersquatting, it also noted that “becoming rich [in arbitraging domain names] does not make one’s activity necessarily illegal. Speculation and arbitrage have a long history in this country.”

Arbitraging domain names carries no stigma in itself, but it can be said without fear of contradiction that buying and selling assets of any kind has both Jekyll and Hyde sides. The Panel in Dr. Muscle v. Michael Krell, FA1903001833036 (Forum April 19, 2019) (<drmuscle.com> reminded us that “Domain name speculation alone is not bad faith. Rather, to constitute bad faith, the speculation must be targeted at the trademark value of a name—in other words, Complainant must show that the Respondent is trying to profit from the value of the trademark in the sale of the domain name rather than from the descriptive value of the domain name.”

Taking into account the totality of the evidence, speculating in domain names is not condemned under the UDRP where there is no unlawful intent to take advantage of a complainant’s mark. ICANN’s Second Staff Report on Implementation Documents for the Uniform Dispute Resolution Policy (October 24, 1999), available at <http:www.icann.org/udrp/udrp-second-staff-report-24oct99.htm> states that

Except in cases involving “abusive registrations” made with bad faith intent to profit commercially from others’ trademarks (e.g., cybersquatting and cyberpiracy), the adopted policy leaves the resolution of disputes to the courts and calls for registrars not to disturb a registration until those courts decide. The adopted policy establishes a streamlined, inexpensive administrative dispute-resolution procedure intended only for the relatively narrow class of cases of “abusive registrations.”

Panelists that believe speculation is actionable cybersquatting rest their conclusions on the following arguments: 1) complainant has a better right to the domain name because Respondent is not using it; 2) that respondent reregistered the domain name continuously after the registration of the mark; and 3) that respondent’s offering price for the domain name is disproportionate to its value and “in excess of your documented out-of-pocket costs directly related to the domain name.” These beliefs, as I say, are retrograde.

What is retrograde? Here are a few examples. It is unnecessary to name the cases: the quotations are offered simply to whet the appetite:

• (From a 2021 decision): “Consequently, a domain name not only must be registered as per the requirements of Paragraph 2 of the Policy, but also its renewals must comply with the same standards. Thus, the requirements of the Policy can be studied not only regarding a domain name registration but also when it is renewed.”
• ”[T]he UDRP is better served by using renewal dates . . . rather than creation dates” because the registrant “reaffirms all information associated with a domain when it is renewed.”
• [Trademark postdated registration of domain name, but Complainant claims common law rights predating registration of domain name. Complainant offers no evidence of common law rights, but Panel accepts its allegation as true]: “[O]ffering to sell the disputed domain name for valuable consideration in excess of Respondent’s documented out-of-pocket costs directly related to the domain name, such as USD $15,000, is indicative of bad faith registration and use pursuant to Policy ¶ 4(b).”
• “Various panels have ordered transfer of a domain name after an extended period of non-use by its registrant . . . Passive holding . . . in spite of the respondent’s knowledge as to the mark in question, . . . [is] sufficient evidence of bad faith use and registration under the general provisions of Paragraph 2 and 4 of the Policy.”

In an early dispute mentioned above, the majority in J. Crew International, Inc. v. crew.com, D2000-0054 (WIPO April 20, 2000) stated that

Speculation is not recognized by the Policy as a legitimate interest in a name, and the Policy should not be interpreted to hold that mere speculation in domain names is a legitimate interest.

Indeed

To hold otherwise would be contrary to well-established principles that preclude mere speculation in names and trademarks and would encourage speculators to appropriate domain names that others desire to put to legitimate use. Ultimately, speculation in domain names increases costs to the operators of websites and limits the availability of domain names.

The dissent, which quickly became the consensus view, stated (modestly), “In my judgment,”

the majority’s decision prohibits conduct which was not intended to be regulated by the ICANN Policy. This creates a dangerous and unauthorized situation whereby the registration and use of common generic words as domains can be prevented by trademark owners wishing to own their generic trademarks in gross. I cannot and will not agree to any such decision, which is fundamentally wrong.

Nevertheless, and despite the dissent’s judgment, the “speculation-is-abusive” meme has never really died out. Two examples which I shall name illustrate the point, Calzaturificio Buttero SRL. v. Yang Chao Wei, CAC v. 103520 (ADR.eu February 23, 2021) (<buttero.com>) and N.V. Nutricia v. Rob Monster, FA2106001952511 (Forum August 2, 2021) (<fortini.com>).

In Calzaturificio Buttero, the Panel repeated Complainant’s allegation that

the disputed domain name has not been resolved to an active website since its registration 18 years ago. In addition, the Complainant claims that the Respondent set the asking price for the disputed domain name via the eName, the Registrar, at RMB 200,000 (approximately equal to Eur 25,000 or USA 18,400) to sell the disputed domain name. Both actions evince that selling and speculation were the main purpose of the Respondent.

Oddly, the Panel noted that “the Complainant is the party who showed the willingness to acquire the disputed domain name but the first [dollar] offer was made by the Respondent via the Registrar.” Ordinarily, if the complainant is the initiating party in a negotiation, respondent’s response cannot be a factor in determining bad faith. Nevertheless, because

the Respondent set an asking price which exceeds the documented out-of-pocket costs related to the disputed domain name [the Panel found it liable for cybersquatting].

In N.V. Nutricia, the Panel accepted Complainant’s allegations as proof that the assertion was true:

Complainant asserts that Respondent is using the <fortini.com> domain name to profit off the goodwill associated with Complainant’s FORTINI mark by selling the domain name for $350,000. According to Complainant, Respondent has not provided justification for such a value.

The Panel then drew the further conclusion that

these facts prove that Respondent knew well of the Complainant’s trademark’s reputation, when initially registering and/or when annually renewing the disputed domain name. Therefore, the Panel finds that Respondent acted in bad faith under Policy Para. 4(b)(iv).

In drawing this conclusion the N.V. Nutricia Panel found warm comfort in the correctness of its decision by citing two earlier decisions that found that an unjustifiably high offering price was the key factor in determining bad faith: Vanguard Trademark Holdings USA LLC v. Wang Liqun, FA1506001625332 (Forum July 17, 2015) (<goalamo.club>. “A respondent’s general offer to sell a disputed domain name for an excess of out-of-pocket costs is evidence of bad faith under Policy Para. 4(b)(i)”) and Galvanize LLC, dba Galvanize v. Brett Blair / ChristianGlobe Network, FA1405001557092 (Forum June 26, 2014) (<galvanize.com>).

In Galvanize, the Panel found that the respondent registered and used the disputed domain name in bad faith under Policy Para. 4(b)(i) “because Respondent countered with an offer of $100,000 when Complainant offered to buy the disputed domain name for $2,500.” Really? “Countered Complainant’s offer to buy the disputed domain name”! If this were the law, the secondary market would soon dry up.

Offering the domain name for a price the Panel considered excessive was key factor in the three-member Panel finding in Autobuses de Oriente ADO, S.A. de C.V. v. Private Registration / Francois Carrillo, D2017-1661 (WIPO February 1, 2018). The Panel was fixated on the $500,000 offer. It found unanimously for Complainant. Why?:

In light of the foregoing, and in view of Respondent’s position as a professional domainer who admittedly focuses on branding, the Panel considers, on the balance of the probabilities, that it more likely than not that Respondent was aware of Complainant and its ADO mark when purchasing the Domain Name, which Respondent is currently offering for sale for USD 500,000. Alternatively, even in the event that Respondent may not have been personally familiar with Complainant and its ADO marks, that does not excuse willful blindness in this case. (Emphasis added).

“Willful blindness” is a convenient substitute for clear thinking. It starts and ends with a supposition: “It is more likely than not.” In this particular case, Respondent challenged the UDRP award in an action under the Anticybersquatting Consumer Protection Act and the action was “amicably” settled by the defendant (previously Complainant) agreement to annulment of the award.

Decisions condemning respondents for “excessive” pricing of domain names continues to arrive with some frequency. What is wrong? Part of what’s wrong is a combination of accepting a debunked construction of Paragraph 2 of the UDRP and misreading of Paragraph 4(b)(i) of the Policy. As I mentioned, arbitraging has a long history: “Buy low, sell high.” Paragraph 4(b)(i) reads:

[C]ircumstances indicating that you have registered or you have acquired the domain name primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to complainant who is the owner of the trademark or service mark or to a competitor of that Complainant, for valuable consideration in excess of your documented out-of-pocket costs directly related to the domain name.” (Emphasis added).

Unless there is evidence that respondent registered the disputed domain name “primarily” to traffic on the value of complainant’s trademark then the “documented out-of-pocket costs” is never a factor in determining bad faith.

The consensus among Panels who understand and apply the law is that the Policy “was designed to deal with a relatively narrow form of dispute between trademark (and service mark) proprietors and domain name registrants, namely the deliberate registration of a domain name featuring the complainant’s trademark or a confusingly similar variant of it with a view to causing damage or disruption to the complainant or his business or unfairly exploiting the complainant’s trademark for the registrant’s own advantage.” Human Resource Certification Institute v. Tridibesh Satpathy, Edusys, D2010-0291 (WIPO May 7, 2010).

What happens with some panelists is that the concept of a “narrow form of dispute” is elongated like chewing gum in complainant’s favor to censure what they perceive as an “unfair practice.” This is an alien concept. It has no place in UDRP jurisprudence, and panelists who repeat it as mantra should return to the classroom for some update on consensus. Responding to a request to purchase from a complainant is not considered bad faith. See Murad, Inc. v. Stacy Brock, FA1202001431430865 (Forum ) and Informa Business Information, Inc. v. Privacydotlink Customer 640040 / Domain Manager, Web D.G. Ltd., [WIPO D2017-1756; pinksheet.com].

In Arm Limited v. Super Privacy Service LTD c/o Dynadot / Ya Lin, D2021-0969 (WIPO May 11, 2021) (<arm.click>), the Panel, apparently accepting as gospel the distinctiveness of Complainant’s mark, ARM, found that

[i]n these circumstances, where the disputed domain name was registered in September 2020 and then listed for sale less than six months later for a substantial price, the Panel concludes that the disputed domain name was registered primarily for the purpose of selling the disputed domain name for an amount presumably in excess of the Respondent’s out-of-pocket costs. In light of the reputation of the Complainant’s trademark, it is reasonable to conclude that the Respondent registered the disputed domain name to sell to the Complainant or a competitor of the Complainant.

The problem with this decision is that it is based on supposition rather than proven facts. To paraphrase Hamlet’s retort to Horatio, there are more “‘Arms’ in the marketplace than Complainant, Horatio.” The USPTO lists hundreds of “Arm-formative” trademarks. Why would this mark owner have a better right to the domain name than any other mark owner who either uses “Arm” or a combination that includes that term?

The better reason, and more realistic view, is expressed in Natixis Wealth Management v. Viljami Ylönen, D2021-1719 (WIPO July 23, 2021) (<vega.investments>):

The Panel notes the Complainant’s reliance on the case of Arm Limited… for its proposition regarding the swiftness of the disputed domain name being offered for sale after the date of registration. The time period in that case was some six months, whereas the period in the present case is even shorter and therefore potentially significant. However, the Panel does not consider that any general rule can be derived from the period between registration and the offering of a domain name for sale. Each case requires to be determined on its own facts

This does not mean that an “excessive price” coupled with proof the domain name was “primarily [acquired for the proscribed] purpose” may not factor into the decision, but to take pricing as the determining factor is putting the thumb on the scale and parties have a right to expect better. As the Panel stated in Personally Cool v. Name Administration, FA1212001474325 (Forum January 17, 2013): “When contacted by any third party, the Respondent was entitled to set whatever price it would be satisfied to receive as consideration for the above-stated reasons and engaged in good faith commercial negotiations. There is absolutely no obligation for a Domain Name owner to accept whatever price a buyer demands.”