Source: http://wakeforestlawreview.com/2016/02/is-domain-name-classification-a-property-right-or-a-contractual-right-the-circuit-split-and-a-clear-path-forward/
Timestamp: 2019-03-20 20:14:37
Document Index: 547679512

Matched Legal Cases: ['§ 8131', '§ 1125', '§ 8131', '§ 1125', '§ 1125', '§ 1125', '§ 1114', '§ 1125', '§ 1129', '§ 8131', '§2', '§ 18', '§ 18', '§ 2']

Is Domain Name Classification a Property Right or a Contractual Right? The Circuit Split and a Clear Path Forward - Wake Forest Law Review
Is Domain Name Classification a Property Right or a Contractual Right? The Circuit Split and a Clear Path Forward
Comments Off on Is Domain Name Classification a Property Right or a Contractual Right? The Circuit Split and a Clear Path Forward
Nicholas Foss Barbantonis*
There is an ongoing controversy as to whether re-registration of domain names constitutes registration within the meaning of the Anti-Cybersquatting Consumer Protection Act (ACPA).[1] The Eleventh Circuit recently held in Jysk Bed’N Linen v. Dutta-Roy that re-registration of domain names constitutes a registration.[2] In doing so, it rejected the Ninth Circuit’s decision in GoPets Ltd. v. Hise.[3] The key point of contention between the circuits is their diverging classification of domain names. The Ninth Circuit views domains as property, whereas the Eleventh Circuit regards domains as a contractual right. The difference is vital in determining the legal characteristics of domains.
Cybersquatting is “the bad faith registration of domain names with intent to profit from the goodwill associated with the trademarks of another.”[4] The ACPA, which amended the Lanham Act in 1999, protects both personal names and marks.[5] The statute seeks to minimize the shortcomings of the Lanham Act’s general trademark provisions regarding cybersquatting, which require the infringing use to be “in commerce.”[6]
The ACPA provides that
[a] person shall be liable in a civil action by the owner of a mark . . . if . . . that person—(i) has a bad faith intent to profit from that mark . . . ; and (ii) registers, traffics in, or uses a domain name that—(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark[.][7]
The current circuit split can be attributed to the ACPA’s failure to define the term “registration.”
I. Cases Prior to Jysk Bed’N Linen v. Dutta-Roy
This section discusses the few comparable cases leading up to the Eleventh Circuit decision in Jysk Bed’N Linen v. Dutta-Roy.
A. Schmidheiny v. Weber[8]—Domain Registration as Contract
In Schmidheiny, Steven Weber (Defendant) offered to sell the domain “schmidheiny.com” to billionaire Stephan Schmidheiny (Plaintiff).[9] The court considered whether the Defendant “registered” the domain name of “another living person . . . with the specific intent to profit from such name by selling the domain name for financial gain to that person.”[10] The initial domain registration occurred on February 28, 1999—nine months before the ACPA took effect on November 29, 1999.[11]
The District Court for the Eastern District of Pennsylvania granted summary judgment in favor of Defendant because the domain name was registered before the ACPA’s effective date.[12] Unwilling to apply the ACPA retroactively, the court instead focused on whether Defendant’s modifications of the domain registration data constituted “registration” under the ACPA.[13] According to the district court, “the plain meaning of the word ‘registration’ . . . imparts . . . no other meaning but the initial registration of the domain name,” and a holding to the contrary would “enfog the bright line date established by the Act.”[14]
The Third Circuit reversed, holding that defendant’s re-registration of “schmidheiny.com” after the effective date of the ACPA constituted a registration within meaning of the ACPA.[15] The Third Circuit’s decision was based on the ACPA’s fundamental purpose, which is to “curtail one form of ‘cybersquatting’—the act of registering someone else’s name as a domain name for the purpose of demanding remuneration from the person in exchange for the domain name.”[16] Every domain registrant enters into a contract with the registrar when acquiring a domain name.[17] The idea is that when the identity of the registrant or registrar is changed, a new contractual arrangement (and registration) is made.[18] The Third Circuit stated that the plain meaning of the word “registration” is not limited to “creation registration,” because 15 U.S.C. § 8131 omits the terms “creation” and “initial” from its requirements.[19] The Third Circuit found it counterintuitive to allow cybersquatters to buy, keep, and sell domain names of a living person’s name because the domain was registered before the ACPA was effective.[20]
B. GoPets Ltd. v. Hise—Domain Registration as Property
In GoPets, Edward Hise (Defendant) registered the domain “gopets.com” in March 1999, as part of a college marketing class.[21] In 2004, a Korean company named GoPets Ltd. (Plaintiff) created a game featuring virtual pets that used the same name as the company.[22] In 2006, Plaintiff successfully registered the mark “GoPets” with the USPTO.[23] Shortly thereafter, GoPets emailed Hise regarding the availability of the “gopets.com” domain name.[24] After negotiations failed, GoPets filed a Uniform Dispute Resolution Policy (UDRP) claim with the World Intellectual Property Organization (WIPO).[25] The panel decided in favor of Hise.[26] Although the panel found that the domain name was confusingly similar with GoPets’ service mark,[27] and that the domain had been used in bad faith, it was nonetheless initially registered in good faith.[28] The UDRP Policy requires a complainant to prove both that the domain “has been registered and is being used in bad faith.”[29]
After losing in WIPO, GoPets substantially increased its offer and informed Hise that they were considering using the alternative domain “gopetslive.com.”[30] Hise replied by saying that he would not accept anything less than $5 million for the domain name.[31] Hise also warned GoPets that using gopetslive.com instead of gopets.com would “continue to confuse newly adopted gopetslive.com” users.[32] According to Hise, GoPets’ search engine results could only improve if they acquired the gopets.com domain.[33] Hise also threatened that if GoPets went forward with developing gopetslive.com, then he would insert competitive meta tags on the current site hosted at gopets.com in an effort to divert customers.[34] Search engines use meta tags to catalogue websites. During the negotiations, Hise registered several other confusingly similar domain names: “gopet.mobi,” “gopets.mobi,” and “gopetssite.com.”[35]
Hise’s actions obviously constituted a bad faith intent to profit on the mark.[36] GoPets’ problem was that the initial registration was in good faith. However, during the conflict, Hise transferred the domain to his corporation, Digital Overture.[37] As a result, GoPets could claim that the domain re-registration constituted “registration” as stipulated by 15 U.S.C. § 1125(d)(1).
The District Court for the Central District of California accepted GoPets’ argument, and granted GoPets motion for summary judgment, but the Ninth Circuit reversed.[38] The Ninth Circuit asserted that considering re-registration to be “registration” under the ACPA would open the floodgates for a range of adjacent actions such as merely modifying contact and billing information, or purchasing domain-masking services, to also be considered “registration.”[39] The court also speculated that it could end up including the action of renewing domain name registrations.[40] The Ninth Circuit based its stance on traditional property law, where the general rule is that “a property owner may sell all of the rights he holds in the property.”[41] According to the Ninth Circuit, the fact that Hise could have kept the domain indefinitely if only he had refrained from changing the registration data to reflect his company as registrant, strengthens this view.[42] The fear is that expanding “registration” to include re-registration makes domain rights inalienable “whether . . . by gift, inheritance, sale, or other form of transfer.”[43] The Ninth Circuit claimed that neither the ACPA’s text and structure nor legislative history prescribes the loss of such rights.[44]
II. Brief Analysis of Jysk Bed’N Linen Inc. v. Dutta-Roy
Since the 1990s, plaintiff Jysk Bed’N Linen Inc. (Jysk), a retail furniture seller, operated under the trademark “By Design.”[45] Jysk contracted with Monosij Dutta-Roy and three other defendants to create a website.[46] A natural part of this task was to register the domain “bydesignfurniture.com.”[47] Dutta-Roy personally registered the domain name, but instead of following Jysk’s instruction to list Jysk as the owner, he listed himself.[48]
The controversy started when Jysk noticed that the domain had expired because it had not been renewed.[49] At this point, Jysk discovered that Dutta-Roy had registered the domain under his name, instead of Jysk’s.[50] In renewing the domain, Dutta-Roy refused to list Jysk as owner until Jysk paid for more than 4,000 work hours Dutta-Roy had allegedly spent working on the website.[51] Presumably to create additional leverage, Dutta-Roy also registered the domains “bydesignfurniture.org,” “bydesignfurnitures.com,” and “bydesign-furnitures.com.”[52] The Northern District of Georgia found that Dutta-Roy’s re-registration was in bad faith, and violated Jysk’s right under the ACPA.[53]
The Eleventh Circuit Court of Appeals affirmed.[54] The Eleventh Circuit had little trouble establishing that the domains were registered with a bad faith intent to profit on Jysk’s mark. In determining whether re-registration qualified as “registration,” the Eleventh Circuit chose to follow the Third Circuit’s example in Schmidheiny, basing its analysis on a contractual perspective.[55] Absent an ACPA definition for “registration,” the plain dictionary meaning of the word should apply.[56] The dictionary meaning encompasses re-registration as an action of “register[ing] again.”[57] As such, the Eleventh Circuit refused to “read additional words into the statute such as initial or creation.”[58] This interpretation coincided with Congress’s intent when enacting the ACPA, the Eleventh Circuit reasoned, stating that “[i]t would be nonsensical to exempt the bad-faith re-registration of a domain name simply because the bad-faith behavior occurred during a noninitial registration, thereby allowing the exact behavior that Congress sought to prevent.”[59]
III. Property Right or Contractual Right?
The fundamental difference between the circuits is their classification of domain names. The Ninth Circuit contends that domain registrations are property of the registrant. In classifying domains as property, property law governs ownership issues. On the other hand, both the Third and Eleventh Circuits view domain names as a right created by contract.
Although the facts in Schmidheiny differ to some degree from GoPets and Jysk—as the issue relates to a famous name, regulated by 15 U.S.C. § 8131, rather than a trademark or service mark, regulated by § 1125(d)(1)(A)—the difference is immaterial for the discussion of what domains should be classified as in the context of “registration.”
The Ninth Circuit’s classification is appealing because it is fundamentally aligned with traditional trademark law, which per se treats trademarks as intangible property owned by the trademark holder.[60] However, it is worth mentioning that in the United States, trademarks (unlike domains) cannot be assigned unless the assignment includes the accumulated goodwill associated with the mark.[61] This requirement of keeping goodwill and trademark together is intended to prevent an assignee from deceiving the public by selling a low-quality product under a well-known, high-quality trademark.[62] Applied to domain names, one could argue that the registrant owns part of the code that makes up the domain and is contained in the registry. To be defined as property, domains must be a thing that someone owns and can exercise control over.[63] Domains are in a sense owned and controlled by the registrant by virtue of having the right to exclude others from using it, but unlike an author’s ability to destroy his digital work of art by deleting it, a registrant can under no circumstance delete his domain. A registrant may only stop renewing the domain, in which case it becomes available for others to register. Registrants’ rights and obligations are regulated by applicable domain name registration agreements. These agreements are made between domain name registrars and the registrant, and contain inter alia party warranties, a definition of the registration term, and mandatory dispute resolution procedures.[64] Although registration agreements normally give the registrant an indefinite possibility to renew, the registrar always retains the right to cancel the registration if the registrant breaches the agreement.[65]
If the identity of the registrant is altered by transferring the domain to another person or entity, then logically it can be said that the new person or entity now draws the benefits and obligations associated with having the domain name. This conclusion should also apply to mere pro forma transfers. The rights and duties contained in the registration agreement are always imposed upon the current registrant. When either the registrant or registrar is changed, a new contractual arrangement has been formed, i.e. a re-registration has taken place.
The Ninth Circuit’s particular interpretation is incompatible with the object and purpose of the ACPA, which is to protect the valuable accumulated goodwill associated with the applicable mark.[66] The Ninth Circuit focuses on a property owner’s right to “sell all of the rights he holds in the property,” but there really is no reason why a person should be permitted to sell any rights associated with an item that has been squatted. It is possible to make analogies to embezzlement and misappropriation of property: In no case is a person who is embezzling or misappropriating an object permitted to demand a ransom to return it to its rightful owner.
The Ninth Circuit’s alienability concern is not rooted in reality because the ACPA only imposes liability where there is bad faith intent to profit on someone else’s mark. As long as the registration does not go against the fundamental considerations behind the ACPA, the registrant will always be able to transfer the domain, be it by sale, gift or inheritance.
The Ninth Circuit’s holding sets a precedent that allows persons acting with bad faith intent to profit on marks just as long as the domain is registered before the mark became distinctive.
While the Ninth Circuit refuses to interpret “registration” expansively, the Third and Eleventh Circuits flip it around and refuse to interpret it restrictively by requiring the registration to be initial. Both methods of interpretation are permissible; the only thing setting them apart is the final result.
The Eleventh Circuit’s holding is the better interpretation. When determining the applicability of the ACPA, viewing domain registrations through the lens of contract law has clear advantages over property law. Although both classifications can be justified, it is not reasonable to view domain registrations as property just to avoid making domain names “inalienable” in cases where the current registrant is using a domain name with a bad faith intention to profit on someone else’s mark or personal name. To conclude, the re-registration of a mark should be considered a “registration” under the ACPA, because it is consistent with Congress’s statutory intent and it is the view that best represents justice.
* Nicholas Foss Barbantonis (LL.M., University of Oslo 2013, LL.M., Michigan State University College of Law 2013), Doctor of Juridical Science (SJD) Candidate 2016; University of Arizona James E. Rogers College of Law.
[1] 15 U.S.C. § 1125(d) (2012).
[2] Jysk Bed’N Linen v. Dutta-Roy, No. 13-15309, 2015 WL 8999502, at *6 (11th Cir. Dec. 16, 2015).
[3] GoPets Ltd. v. Hise, 657 F.3d 1024 (9th Cir. 2011).
[4] Vulcan Golf, LLC v. Google Inc., 726 F. Supp. 2d 911, 915 (N.D. Ill. 2010) (quoting Solid Host, NL v. NameCheap, Inc., 652 F. Supp. 2d 1092, 1099 (C.D. Cal. 2009)). For a more substantial discussion on what cybersquatting is, see Nicholas Foss Barbantonis, Should Contributory Cybersquatting be Actionable? 17 N.C. J.L. & Tech. 79, 85–89 (2015).
[5] 15 U.S.C. § 1125(d).
[6] 15 U.S.C. § 1114(1)(a) (2012).
[7] 15 U.S.C. § 1125(d)(1)(A) (emphasis added).
[8] 319 F.3d 581 (3d Cir. 2003).
[9] Id. at 581.
[10] Id. at 582 (quoting 15 U.S.C. § 1129).
[11] Id. at 581.
[12] Schmidheiny v. Weber, No. 01-CV-377, 2002 WL 562642, at *3 (E.D. Pa. Feb. 14, 2002) rev’d, 319 F.3d 581 (3d Cir. 2003).
[15] Schmidheiny, 319 F.3d at 583.
[16] Id. at 582 (quoting 145 Cong. Rec. S14715 (daily ed. Nov. 17, 1999) (statement of Sen. Lott)).
[17] Id. (citing Jonathan Weinberg, ICANN and the Problem of Legitimacy, 50 Duke L.J. 187, 216–17 (2000)).
[18] Id. at 583.
[19] Id. at 582–83. The Court cites section 1129, but the section was transferred to section 8131 in 2008. 15 U.S.C. § 8131 (2012).
[20] Id. at 583.
[21] GoPets Ltd. v. Hise, 657 F.3d 1024, 1026–27 (9th Cir. 2011).
[25] Id. See also Uniform Domain Name Dispute Resolution Policy, ¶ 4, ICANN, https://www.icann.org/resources/pages/policy-2012-02-25-en (last visited Feb. 13, 2016) [hereinafter UDRP]. WIPO is one of five Internet Corporation for Assigned Names and Numbers (ICANN) approved Alternative Dispute Resolution (ADR) providers. See List of Approved Dispute Resolution Service Providers, ICANN, https://www.icann.org/resources/pages/providers-6d-2012-02-25-en (last visited Feb. 13, 2016).
[26] GoPets Ltd., 657 F.3d at 1027.
[27] The UDRP requires the complainant to prove that he or she owns the trade or service mark in question and that the alleged infringing domain name is “identical or confusingly similar.” See UDRP, supra note 25, at ¶ 4(a)(i).
[28] GoPets Ltd., 657 F.3d at 1027–28.
[29] UDRP, supra note 25, at ¶4(a)(iii) (emphasis added).
[30] GoPets Ltd., 657 F.3d at 1028.
[36] Id. at 1032.
[37] Id. at 1028.
[38] Id. at 1029.
[39] Id. at 1030–31. Domain masking is a service offered to registrants to hide their identity from public WHOIS records. In practice, this entails changing the WHOIS data to reflect the registrar’s or some other third party’s identity instead of the actual registrant.
[40] Id. at 1031.
[43] Id. at 1031–32.
[44] Id. at 1032.
[45] Jysk Bed’N Linen v. Dutta Roy, No. 13–15309, 2015 WL 8999502, at *1 (11th Cir. Dec. 16, 2015).
[53] Id. at *2.
[54] Id. at *1.
[55] Id. at *5.
[56] Id. (citing Cox Enters., Inc. v. Pension Benefit Guar. Corp., 666 F.3d 697, 704 (11th Cir. 2012), Redus Fla. Commercial, LLC v. Coll. Station Retail Ctr., LLC, 777 F.3d 1187, 1191 (11th Cir. 2014)).
[57] Id. at *5 (citing Re-register, Oxford English Dictionary (2015)).
[58] Id. at *6.
[60] 1 J. Thomas McCarthy, McCarthy on Trademarks And Unfair Competition §2:14 (4th ed. 2015).
[61] 3 J. Thomas McCarthy, McCarthy on Trademarks And Unfair Competition § 18:2 (4th ed. 2015).
[62] Id. at § 18:3.
[63] See Frederick M. Abbott, On the Duality of Internet Domain Names: Propertization and its Discontents, 3 N.Y.U. J. Intell. Prop. & Ent. L. 1, 24 (2013).
[64] See, e.g., GoDaddy Domain Name Registration Agreement, GoDaddy.com, https://www.godaddy.com/agreements/showdoc.aspx?pageid=REG_SA (last revised Feb. 13, 2016).
[65] See, e.g., id. § 2 (“[The registrant] acknowledge[s] and agree[s] that the Registry or the registrar can cancel the registration of the domain name if any of the warranties required are found to be untrue, incomplete, incorrect or misleading.”).
[66] Jysk Bed’N Linen v. Dutta Roy, No. 13–15309, 2015 WL 8999502, at *4, *8 (11th Cir. Dec. 16, 2015).
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