The rapid growth of the Internet has spawned legal disputes over ownership rights in Internet addresses or “domain names.” As the Internet gains popularity, businesses are discovering that a unique or identifiable Internet address can be the key to running a profitable Internet site and developing profits.
The structure of a domain name demands that each name be unique. Internet addresses have traditionally been issued and registered on a first-come, first-served basis. In the last few years, corporations such as MTV and McDonald’s have discovered that their names (e.g. MTV.com) were already registered. While most registrations are legitimate, some individuals have registered unique Internet addresses and held them for the sole purpose of forcing a large corporation to purchase the registration at an inflated price. This practice is called “Cybersquatting.”
In response to the practice of Cybersquatting, the law has developed to protect large businesses and the corresponding goodwill they have built up in their tradenames. Several cases in the past few years have held that Trademark Law protection applies to registration of domain names.1 By registering a domain name that is similar or identical to an existing trademark, a domain name owner may be diluting and infringing upon the rights of the trademark owner. In recent decisions, courts have enjoined Cybersquatters from using their existing domain names and have awarded declaratory relief to the owners of a registered trademark.2
Beyond the practice of Cybersquatting, legitimate disputes often arise in the registration of domain names. Smaller companies that have existed for many years are being sued for registering prominent domain names.3 For instance, Hasbro owns the trademark to the CLUE board game and decided to make interactive games on CD-ROM. When Hasbro tried to register the domain name “clue.com,” it discovered that another company had already registered the address. Hasbro has filed suit against Clue Computing challenging registration of the domain name “clue.com.” In another recent case, Gateway 2000 filed an action for a preliminary injunction preventing a smaller company from using the domain site “Gateway.com.”4 In contrast to the majority of disputes, the Defendant was an ongoing business that had been actively using the domain name since 1988 in connection with computer consulting services. The court observed that the case did not involve “opportunistic behavior” known as Cybersquatting, and ruled that, because the defendant had a legitimate reason for its registration and use of the domain name, the motion for preliminary injunction would be denied. When two businesses share a common name, neither may have superior rights in registration and, consequently, priority may return to simply a first-come, first-served basis.
Domain name disputes are increasing at such an alarming rate that Network Solutions, the company that controls most of the domain name registrations in the U.S., has been named as a defendant in several lawsuits alleging that its flawed registration policy caused the disputes.5 Network Solutions has recognized the problem and has changed its policy, but the revised policy is troublesome as well. The new policy specifies that the holder of a registered trademark may challenge registration of a domain name. While Network Solutions does not offer any affirmative protection to a trademark holder, its policy states that any domain name registrant must forfeit its registration if the name conflicts with a trademark held by another entity. Once sufficient proof of the registered mark is presented, Network Solutions determines whether the domain name is similar to the protected mark. If there is a significant risk of conflict with the registered mark, the domain name owner must either present sufficient proof that it owns a mark related to the domain name, surrender the name, or bring a suit against the trademark owner to dismiss the challenge. Obviously, the new policy will not eliminate domain name disputes entirely.
In contrast to Cybersquatting, the revised policy may harm small businesses. In a recent suit over the name “Spree.com,” a small business was denied use of the domain name because Sprint Corporation challenged its registration. Sprint owns a trademark for the name “Spree Prepaid Foncard.” In its Complaint, Sprint alleged that consumers were likely to confuse the “Spree.com” domain site with the Foncard products. Although the suit may have little chance of succeeding on the merits, the owner of the domain name was required to discontinue use of the name until such time as the dispute is resolved. The small business has filed suit in hopes of obtaining a declaration that its site does not interfere with the rights held by Sprint. Meanwhile, most of the owner’s revenue has ceased. Obviously, application of such a policy could have disastrous effects on any business concentrating on Internet commerce. Still more troublesome is the fact that a business owner might be forced to file several suits if other potentially conflicting trademarks exist. The suit against Sprint would not prevent another trademark owner from challenging the use of “Spree.com.”
One domain name owner has responded by filing a complaint alleging that the trademark owner, by causing Network Solutions to suspend plaintiff’s domain name, has tortiously interfered with plaintiff’s business relationships with its Internet customers and has misused its trademark rights in bad faith.6 In addition to monetary damages, plaintiff has requested the court to cancel defendant’s trademark registration. These dilemmas emphasize the importance of obtaining formal rights in a mark or name used in an Internet address and diligently searching for potential conflicts between domain names and registered trademarks.
To avoid the problems outlined above, several steps should be taken to protect the use of your mark or your company’s name:
- Submit an application to register your trademark with the Patent and Trademark Office. Registration is usually inexpensive and provides the best evidence that your company owns the rights in a particular name. Be aware that registration is not available for every name and may be denied if a potential conflict exists.
- Check whether your trademark, company name, etc., is available as a domain name by performing a search of registered domain names. If developing a website is important your company, establish an address as soon as possible. If your name is not available, try to think of alternative names that would provide users with intuitive access to your site.
- Perform a search for federal and state trademark names that might conflict with the domain names you have chosen. Before expending resources on developing goodwill for your site, it is important to limit the possibility of being named as defendant in an infringement lawsuit.
- Once you have selected your tradename and/or domain address, perform periodic searches with the major search engines on the Internet to determine if other sites are using your mark prominently in the content of their page.
- Determine if the sites are damaging to your trademark rights. If so, immediately notify the appropriate parties to stop these activities.
A final note. Once a site is established, a company should proceed with caution before linking to and using the names of other sites. Ticketmaster has filed a suit against Microsoft for framing and linking to its website.7 A decision is forthcoming and the potential impact is enormous. Linking one site to others is an established and efficient manner of navigating on the Web. However, with the increased commercialization of the Web, traditional rules of efficiency and ease of use may not survive legal scrutiny. The Web can be a powerful tool for developing a business, and with the proper foresight, you can avoid the growing pains being experienced by others.
Berry Moorman can assist your business with registering its domain name, obtaining and protecting trademark rights and generally advising your business on the issues that arise in this context.
1 Teletech Customer Care Management -vs- Teletech Communications, No. 96-8377 MRP (C.D. Cal. May 9, 1997).
2 Playboy Enterprises, Inc. v. Calvin Designer Label, No. 97-3204 CAL (N.D. Cal. Sept. 8, 1997).
3 Hasbro, Inc. v. Clue Computing, Inc., No. 97-10065 DPW (D. Mass. filed Jan. 10, 1997).
4 Gateway 2000, Inc. v. Gateway.Com, Inc., 1997 U.S. Dist. LEXIS 2144 (E.D. N.C. Feb. 6, 1997).
5 See e.g. Database Consultants, Inc. v. Network Solutions, Inc.; Giacalone v. Network Solutions, Inc., No. C-96-20434 (N.D. Cal. filed May 30, 1996).
6 Giacalone, supra.
7 Ticketmaster Corp. v. Microsoft Corp., No. CV 97-3055 DDP (C.D. Cal. filed April 28, 1997).