A new decision by the Ninth Circuit Court of Appeals highlights the risks brand owners face when adopting a new trademark that also happens to correspond to an Internet domain name already registered to someone else.

In GoPets Ltd. v. Hise, No. 08-56110, 2011 U.S. App. LEXIS 19405 (9th Cir. Sept. 22, 2011), the Ninth Circuit held that the owner of a federally registered mark ("GoPets") could not establish a claim for cybersquatting under the federal Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d), where the disputed domain name (GoPets.com) had been registered by the original owner before the "GoPets" mark had become distinctive (i.e., before it was protectable as a trademark). This applies even where a subsequent owner acquired the domain and sought to exploit it for profit in bad faith.

The central issue was whether the term "registration," as used in the ACPA's provisions barring the bad faith registration, trafficking, or use of a domain name identical or confusingly similar to a mark that "is distinctive at the time of registration of the domain name" (15 U.S.C. § 1125(d)(1)(A)(ii)(I)), applies only to the initial registration of the domain name or extends to a re-registration of a currently registered domain name by a new registrant. The Ninth Circuit held that re-registration is not a "registration" within the meaning of the ACPA. As a result, the viability of GoPets' claim for cybersquatting turned on the status of the "GoPets" mark at the time the domain was registered by the original owner, rather than at the time the domain was re-registered by the subsequent owner.

Because it was undisputed that the GoPets.com domain was registered by the original owner several years before GoPets first adopted and used its "GoPets" mark, GoPets could not establish a violation of the ACPA, despite the fact that the "GoPets" mark was distinctive and protectable by the time the GoPets.com domain was re-registered by the subsequent owner. Accordingly, the Ninth Circuit vacated that portion of the district court's judgment finding cybersquatting and awarding $100,000 in damages based on the re-registration of the GoPets.com domain. However, the Ninth Circuit affirmed the district court's judgment to the extent it was based on the same defendants' registration of several other domain names—such as gopetssite.com, gopets.mobi, and mygopets.com—after the "GoPets" mark had been adopted by GoPets.

In holding that re-registration of a currently registered domain name by a new registrant does not constitute "registration" of a domain under the ACPA, the Ninth Circuit has created a split of authority with the Third Circuit, which previously reached the opposite conclusion in Schmidheiny v. Weber, 319 F.3d 581 (3d Cir. 2003). Accordingly, it may be the U.S. Supreme Court that ultimately has the final say in the matter.

What Your Business Can Do

In the meantime, there are several steps a business can take when selecting and adopting new marks for their goods and services to help avoid the pitfalls encountered by GoPets:

  • Include a search for domain names incorporating the proposed new marks as part of any trademark knock-out search.
  • Secure available domains early – don't wait until launch of the new product or service to register key domain names.
  • If the key domain names incorporating the proposed new marks are already registered, pursue efforts to negotiate the purchase of the domains before adopting and investing substantially in the new marks. If the current owner is intransigent, consider alternative marks.

Most important, businesses should not proceed on the assumption that mere registration of a trademark will foreclose the owner of a previously registered domain name from exploiting the reputation and goodwill invested in the new mark. Under the Ninth Circuit's holding in GoPets, the mark holder not only runs the risk that the original owner of the domain will be able to exploit the domain for profit with impunity but may face the same situation, or worse, if the domain is transferred to new owners.

The Ninth Circuit's full opinion in GoPets Ltd. v. Hise can be found here.