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What Due Diligence Satisfies Domain Name Registrant’s Representations (UDRP)?

Not infrequently mark owners in disputes under the Uniform Domain Name Dispute Resolution Policy (UDRP) claim that respondents should have been aware that the domain names they registered corresponded to their marks; and from this, urge panelists to draw the inference that the registrations were designed to take advantage of their goodwill and reputation. To test this premise, we need to take a step back for a quick look at UDRP provisions. All it takes to acquire a domain name is to sign a registrar’s registration agreement. There are no gatekeepers to restrict one’s choice, which could be a domain name corresponding to a mark that is or later claimed to be well-known or famous. In fact, ninety-plus percent of the time, the choices are indeed infringing. But sometimes, in the region of 7%-8% of cases, registrants’ choices are declared lawful; at other times, some choices are declared unlawful, and when challenged in actions under the Anticybersquatting Consumer Protection Act (ACPA), registrants have been vindicated.

UDRP Paragraph 4(b)(i) makes registering a domain name a violation if it is acquired “primarily for the purpose of selling” it to the mark owner. Of the various registrants charged with cybersquatting, two particularly stand out: those in the business of monetizing domain names regardless they may be infringing; and “investors” who are in the business of acquiring and selling attractive domain names, who are mindful of third-party rights. Both registrants have been referred to as domainers which is unfortunate because although in a general sense that is what they are, it erases the important distinction that one is a cybersquatter and the other conducts a legitimate business.

Among the questions that need answering are: What steps should registrants have taken? And what due diligence is enough to avoid the imputation of cybersquatting? Two factors, in particular, are important: one is motivation, and the other is timing. “Primarily for the purpose of selling” implies the registrant has actual knowledge of the mark. For motivation: if the purpose is the domain name’s semantic value, the registrant cannot have in mind its value to any particular mark owner. For timing: if a registration is lawful, it cannot be retroactively declared unlawful if at a later date a mark having no renown on acquisition is solicited later when it acquires an elevated reputation. I want to test both of these propositions against consensus views.

In its first outing in 2007, the term “domainer” was used descriptively and neutrally. The Panel in Mercer Human Resource Consulting, Ltd., Mercer Human Resource Consulting Inc. v. Konstantinos Zournas, D2007-1425 (WIPO November 23, 2007) noted that the “Respondent is a domainer in the sense he has a substantial portfolio.” It dismissed the Complaint because “Complainants did not file any evidence showing that their trademark MERCER was commonly known among the general public at the time of registration of the domain name in dispute.”

The UDRP database shows hundreds of references to domainers, not all of them complimentary. Complainants have the burden of proving bad faith. Mercer again: “While the Panel is not comprehensively persuaded by the Respondent’s various statements of intent, the onus is nevertheless on Complainants to establish on a balance of probabilities that Respondent registered the domain name in dispute in bad faith.” However, the closer the call respondent’s silence may tip the balance in complainant’s favor. This is addressed in two frequently cited cases from 2005 and 2007 granting the complaints and transferring the domain names.

A typical registrar registration agreement provides (among many other things) that “You agree to comply with the [Internet Corporation for Assigned Names and Numbers] ICANN requirements, standards, policies, procedures, and practices.” (Godaddy Domain Name Registration Agreement, Para. 4). The registrant agrees to be bound by the current Dispute Resolution Policy (Para. 6). More specifically, in UDRP Paragraph 2 (“Your Representations):

By applying to register a domain name, or by asking us to maintain or renew a domain name registration, you hereby represent and warrant to us that (a) the statements that you made in your Registration Agreement are complete and accurate; (b) to your knowledge, the registration of the domain name will not infringe upon or otherwise violate the rights of any third party; (c) you are not registering the domain name for an unlawful purpose; and (d) you will not knowingly use the domain name in violation of any applicable laws or regulations. It is your responsibility to determine whether your domain name registration infringes or violates someone else’s rights. (Emphasis added subparagraphs (c) and (d).

Panelists are divided upon the amount of due diligence required to satisfy subparagraphs (c) and (d). In Mobile Communication Service, Inc. v. WebReg, RN, D2005—1304 (WIPO February 24, 2006), for example, the Panel explained that respondents must be able to show that

  1. They made good faith efforts to avoid registering and using domain names that are identical or confusingly similar to marks held by others;
  2. The domain name in question is a dictionary word or a generic or descriptive phrase;
  3. The domain name is not identical or confusingly similar to a famous or distinctive trademark; and
  4. There is no evidence that respondent had actual knowledge of complainant’s mark.

Paragraph 3 is particularly interesting for the phrase “famous or distinctive trademark.” We know what a famous trademark is, but what is a distinctive trademark? A registered trademark is distinctive by definition, so “distinctive” must mean something else, and that something else is “distinctive in the market.” In Mercer, Complainant’s mark lacked distinctiveness. This illustrates an important point that not all trademarks that are distinctive in a trademark sense are distinctive in a market sense. I will return to this in a moment in talking about “reputation,” by which I mean reputation when the domain name was registered as opposed to a mark or its owner’s reputation when it initiates a UDRP proceeding.

Panelists generally agree with the Mobile Communication conditions. It is so because the list makes sense, particularly for marks highly distinctive in the marketplace, which we commonly think of as “well-known or famous.” The greater the reputation (or even a lesser-known mark but associated with one particular trader and none other), the more likely the registrant has registered the challenged domain name with the mark owner in mind. When we talk about reputation, we mean what it was when the domain name was registered because there may be a gulf between that date and the date of the complaint when the mark owner is more established and its reputation greater. However, where there are many users of the same term, it becomes increasingly unlikely (absent evidence to the contrary) that the domain name registrant has any one trademark owner in mind.

In mVisible Technologies Inc v. Navigation Catalyst Systems Inc., D2007-1141 (WIPO November 30, 2007) the Panel stated that “a sophisticated domainer who regularly registers domain names for use as PPC landing pages cannot be willfully blind to whether a particular domain name may violate trademark rights,” adding that “a failure to conduct adequate searching may give rise to an inference of knowledge [of complainant’s mark]”). I cannot think this is disagreeable to anyone, but would underscore that the marks in Mobile Communication and mVisible and the many other cases imposing a higher degree of due diligence on domainers are well-known or famous either because their distinctiveness is significantly greater than any other user of the same term or because the mark is composed of uncommon words or combinations.

For example, in mVisible, the mark is MYXER TONES, and the 35 domain names in issue are infringing because they incorporate a string confusingly to the mark, one of which is <myxerpones.com>. The inference drawn by the Panel discounting Respondent’s disclaimer of knowledge is on target. There is no mystery who Respondent had in mind, even as he claimed a right to registering them and disclaimed bad faith. The same can be said of Respondent in General Electric Company v. Marketing Total S.A, D2007-1834 (WIPO February 1, 2008):

The circumstances of this case suggest that it was the Respondent’s intention to bulk-register domain names that had some value in directing Internet traffic to its portal websites. Domain names that include, or are confusingly similar to, trademarks naturally have more value for this purpose. There is no evidence in this case that the Respondent took any measures to avoid exploiting the value of others’ trademarks.”

Will anyone dispute that GENERAL ELECTRIC is famous? On the USPTO database, it is the sole owner of that brand name. No one would be surprised, and no one would question the inference that any domain name corresponding to such a mark is cybersquatting (absent of course evidence of specific defenses to the contrary). Or, RED BULL, which is famous because it has gained great distinctiveness in the market, and its UDRP complaints have been granted several hundred times.

In contrast, where the domain name is either lesser known or in a niche market, the complainant must demonstrate that its mark has reached a level of distinctiveness that would plausibly support an inference of actual knowledge. The question to be answered, and this by concrete evidence, is how does a registrant acquire the kind of knowledge about a mark owner if the mark owner is little known, whose reputation is in a niche market, or is one of many other market players using the same term to market its goods or services?

Panelists are generally very careful to avoid drawing inferences from weak records. Two cases of many illustrate the point I want to make, Pharmactive Biotech Products, S.L. v. HugeDomains.com, D2020-3529 (WIPO March 23, 2021) (<affron.com>) and Breezy Inc. v. Domains by Proxy, LLC, DomainsByProxy.com / VR PRODUCTS I LLC, D2021-1486 (WIPO July 6, 2021) ((Complainant has not adduced sufficient evidence of the renown of its mark at that time [acquisition of the domain name] to support such an inference [of actual knowledge].”).

The Pharmactive Panel filed a split decision on the question of actual knowledge with the Dissent citing mVisible and Media General. The Panel majority determined as follows with emphasis on reputation:

the Complainant has failed to establish that the term “Affron” is uniquely associated with it and its product. There is no evidence before the majority of the Panel to show that the Complainant has any reputation outside the specialized field in which it operates, and the earliest evidence about the use and public recognition of its Affron product dates from 2018. There is no evidence that the wider public in general, or the Respondent in particular, must have known of the Complainant at the time when the disputed domain name was registered in 2013.

The Dissent says: “The dissenting panelist respectfully does not consider that this bare assertion by the Respondent rebuts the Complainant’s prima facie case. The Respondent’s statement that the Complainant’s mark is generic should not advance its case, since there is a prior valid trademark registration by the Complainant, which must confer the right to the latter to admit the case.” In other words, the Dissent would reverse the burden of proof; instead of Complainant having the burden, it demands that Respondent prove it has no actual knowledge.

To defeat the imputation of bad faith registration (as formulated by the Panel in Media General and mVisible (and the Dissent in Pharmactive Biotech) respondents must be able to show (not as a burden but in rebuttal) that they have conducted an adequate search, and if this search has disclosed that the mark is not distinctive in a market sense, that its reputation could plausibly not have reached respondent, then there can be no question that its acquisition of the domain name corresponding to the domain name is lawful.

We must now deal with another typical accusation, that in registering a domain name corresponding to a complainant’s mark respondent committed the cardinal sin of willful blindness. However, this overlooks that blindness can only be willful if there is a more than likely certainty that in view of the factual circumstances, a denial of actual knowledge is implausible. So, for example, the Panel in Virgin Enterprises Limited v. Derek Kagimoto, Virginiorbit, D2021-1828 (WIPO August 12, 2021) (<virginiorbit>) was correct to explain that “in certain circumstances, registrants of domain names have an affirmative duty to abstain from registering and using a domain name which is either identical or confusingly similar to a prior trademark held by others and that contravening that duty may constitute bad faith.” This is absolutely correct for a mark as highly distinctive as VIRGIN, but less so for a mark that lacks that degree of distinctiveness.

In considering a mark’s reputation, it rises as events occur that enhance its distinctiveness, such for example an enlargement of the mark owner’s market but reputation takes time to develop. It always starts on a lower rung. Majid Al Futtaim Properties Llc v. Domain-It Hostmaster, Domain-it!, Inc., D2021-0591 (WIPO April 30, 2021) (<citycentre.com>. “Complainant has . . . not demonstrated that the Respondent, which acquired the disputed domain name in 2001, when the Complainant apparently only had a single trademark registration in Lebanon (for BEIRUT CITY CENTER), was, or ought to have been aware of the Complainant and its trademarks at the time of registering the disputed domain name.”). It cannot be said of a mark beginning its commercial journey that goodwill adheres instantly upon its entry into the market. A reputation in the making is less than a reputation achieved.

It would follow from this that later events solidifying reputation cannot be applied retroactively in charging a registrant with actual knowledge when it acquired the domain name. See Green Tyre Company Plc. V. Shannon Group, D2005-0877 (WIPO Oct. 5, 2005) (finding the Respondent did not have the requisite bad faith when it registered the Domain Name ... [The] Panel finds that the circumstances as mentioned by the Complainant which are of a later date than the registration of the Domain Name, cannot lead to the conclusion that the original registration in good faith in retrospective has become a registration in bad faith.”).

The following rule has emerged: for well-known and famous marks, a registrant’s “failure to conduct adequate searching may give rise to an inference of knowledge [of complainant’s mark]” (mVisible). While “adequate searching” cannot mean “no searching” neither does it mean “exhaustive searching.” It means conducting a reasonable search to rule out the likelihood that the domain name corresponds with a mark that has achieved such a reputation or distinctiveness in the market at the time of the search that on a balance of probabilities, it is more likely than not the registrant had actual knowledge of the mark and had it in mind in registering the domain name. This standard accommodates both parties, for if the registrant’s burden was to rule out infringement conclusively that would reverse the onus of proof.

The final point to be made concerns soliciting the mark owner. Is it ever permissible? It certainly is not permissible if the acquisition was primarily for the purpose of selling it to the mark owner. This is illustrated by Bank of Scotland Plc v. Shelley Robert, Diversity Network, D2015-2310 (WIPO Feb. 15, 2016): “[W]ithin 24 days [after registering the disputed domain name, Respondent] initiated correspondence with the Complainant seeking to invite an offer to purchase the domain name <halifax.com>.” It is permissible where the mark owner is the initiating party, as in Mark Overbye v. Maurice Blank, Gekko.com B.V., D2016-0362 (WIPO April 15, 2016) (<gekko.com>) in which the Panel found that “Respondent’s offer to sell the disputed domain name to Complainant is not relevant as Respondent was first approached by Complainant to sell the disputed domain name.”

Between these two extremes, there is no reason that solicitation is not permissible if, between the acquisition of the disputed domain name and soliciting an owner, its mark has achieved distinctiveness in the market that it did not previously have. Lacking evidence of such a primary purpose is the final element of Para. 4(b)(i)—offering the domain name “for valuable consideration in excess of your documented out-of-pocket costs directly related to the domain name” does not apply. However, this requires affirmative rebuttal that the registrant did not have complainant in mind in registering the domain name.

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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