Plaintiff Xereas operated an entertainment business under the mark RIOT ACT. In 2010, Xereas agreed to partner with Defendants Dawson and Heiss (collectively “Defendants”) in opening a “Riot Act Comedy Club.” As part of the partnership, Xereas paid a third party to create a comedy-club website at the “riotactcomedy.com” domain name he had registered years before. Shortly after the club opened, Defendants removed Xereas from his role in the company and instructed the website developer to transfer ownership of the domain name from Xereas to the company by revising the registration information. Xereas sued Defendants for cybersquatting under the Anticybersquatting Consumer Protection Act (“ACPA”) and various state-law claims. Defendants moved to dismiss the case for failure to state a cause of action.
The court denied Defendants’ motion to dismiss Xereas’s cybersquatting claim, holding that Defendants “registered” the domain name when they instructed the website developer to change the registration information and transfer ownership in the domain name from Xereas’s name to the company. The ACPA prohibits the bad-faith registration of trademarks as domain names where a party uses a mark that is “identical or confusingly similar” to a mark that is famous or distinctive when the domain name is registered. Defendants argued that the involuntary transfer of the domain name from Xereas to the company did not violate the ACPA because it was a “re-registration” of a domain name that was registered before the RIOT ACT mark became distinctive.
Defendants argued that the court should follow the Ninth Circuit’s decision in GoPets Ltd. v. Hise, 657 F.3d 1024 (9th Cir. 2011), where it held that a defendant was not liable for cybersquatting because the term “registration” in the ACPA did not refer to “re-registrations” of a domain name registered before the disputed mark became distinctive. In that case, the defendant registered a domain name using the phrase GO PETS several years before the plaintiff began using the mark. After the plaintiff’s GO PETS mark became distinctive, the defendant sold the domain name to a third party. The Ninth Circuit held that this was not a “registration” under the ACPA, stating that by not allowing a defendant to freely transfer his or her domain name, it could become unalienable, which would not comport to “traditional property law principles which grant a property owner the right to sell all of his rights in property to another.” In particular, the Ninth Circuit found “no basis in [the] ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner.”
The court found GoPets “unpersuasive,” holding that the ACPA “does not take away the initial registrant's rights to sell or transfer all of the rights he or she owns in a distinctive or famous domain name to any other party.” Instead, the ACPA “simply requires that a domain name registrant not register the domain name with a bad faith intent to profit.” The ACPA’s focus, the court held, is “on the transferee’s bad faith intent to profit from re-registering a domain name, not on restricting the ability of a domain name owner to sell or transfer his property interest in the domain name to anyone he would prefer.” In addition, the court found “no reason why any party who registers a distinctive or famous domain name with bad faith intent to profit after the original registration should escape [ACPA’s] enforcement.” The court held that the factual allegations in Xereas’s amended complaint properly stated a claim for cybersquatting under the ACPA against Defendants and denied Defendants’ motion to dismiss.
This case is of interest because it appears to create a split between the Ninth Circuit and the U.S. District Court for the District of Columbia on what is considered a “registration” under the ACPA.