Cybersquatting, under the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(d), is registering, trafficking in, or using an Internet domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else. The cybersquatter may offer to sell the domain to the person or company who owns the trademark contained within the domain name but at an inflated price. Sometimes, cybersquatters post paid links to the trademark owner’s website via advertising networks, thus monetizing their squatting by collecting fees for referring traffic to the owner’s site.

Historically, to protect their marks and brand, a trademark owner might seek a cancellation or transfer of the infringing domains under the Uniform Domain-Name Dispute-Resolution Policy (UDRP). UDRP proceedings are fairly inexpensive arbitration proceedings established by the Internet Corporation for Assigned Names and Numbers (ICANN) for the resolution of disputes regarding the registration of Internet domain names. A panel assesses whether the complained-of domain name is identical or confusingly similar to the trademark, whether the alleged infringer has any legitimate rights to the mark and whether the domain name was registered in bad faith.

This process is typically faster and cheaper than litigation. Yet, to accomplish its goals of expediency and cost-effectiveness, UDRP proceedings forsake the strict guidelines regarding the accuracy, admissibility, and relevance of evidence found in traditional courts. In addition, if the domain name dispute touches on other intellectual property issues for the trademark owner, or poses significant financial losses, UDRP’s sole remedies of cancellation or transfer of the domain names in dispute may be inadequate. Equally concerning for a trademark owner is the fact that UDRP proceedings are not binding; meaning that even if a trademark owner is successful in cancelling or transferring the disputed domain name, the domain owner may challenge the decision by filing suit. Conversely, a trademark owner who did not succeed with UDRP may seek redress from the federal courts under section 43(d) of the Lanham Act, 15 U.S.C. § 1125(d). Litigation, however, is costly and slow and puts the company or individual through the ringer of discovery and depositions.

For a company with an international trademark portfolio comprising thousands of marks, the potential for endless, nonbinding UDRP proceedings as well as years of costly, slow-moving litigation is daunting. Equally frustrating is the fact that neither litigation nor UDRP proceedings prevent copycat cybersquatters from registering similarly infringing domains. Ultimately, a trademark owner may find itself in an endless game of whack-a-mole – defending against cybersquatters with individual UDRP or legal proceedings. This approach quickly accumulates legal costs and can be an inefficient use of company resources.

A decision in Academy of Motion Pictures Arts and Sciences v. Inc., Case 2:10-cv-03738-AB-CW (C.D. Cal. June 21, 2013), may provide trademark owners with another weapon against cybersquatters – filing suit against the domain registrars and hosting companies.

The Academy Case

The Academy of Motion Picture Arts and Sciences (the Academy) filed suit against, a domain registrar and hosting company, alleging that GoDaddy was in violation of ACPA by monetizing, and therefore “using” or “trafficking in,” 115 domain names that are identical, confusingly similar, or dilutive of the Academy’s trademarks (OSCAR, OSCARS, OSCAR NIGHT, ACADEMY AWARD, and ACADEMY AWARDS) with bad faith intent.

The basis of the Academy’s claims was that GoDaddy’s Parked Pages Program monetized the allegedly 115 infringing domain names. The Parked Pages Program is distinct from GoDaddy’s domain registration program, which allows GoDaddy to register domain names without monetizing them. This distinction is important to the court’s analysis of the Academy’s motion for partial summary judgment.

The Parked Pages Program consists of two sub-programs: the Free Parking Program and the Cash Parking Program. Both programs allow GoDaddy to generate revenue from the domain names it registers. In GoDaddy’s Cash Parking Program, registrants pay a fee to allow GoDaddy and its advertising partners to place ads on the parked webpage associated with the domain name. When a user types the domain name into the web browser and presses enter, a webpage will be created with ads from the advertising partner. This page exists only for the length of time that the Internet user keeps the webpage open. Once the webpage is closed, the parked webpage ceases to exist. The next time the domain name is entered into a browser, GoDaddy creates a new page with entirely new content. Revenue is generated from users clicking on the advertisements. The revenue is then split among the registrant, GoDaddy and the advertising partner.

The Free Parking Program does not require a fee, but permits the registrant to opt into the Parked Pages Program and grant GoDaddy permission to point the registrant’s domain names to GoDaddy’s websites or servers and to place advertisements on the pages that generate revenue for GoDaddy. Sometimes this advertising is for GoDaddy’s services. As part of its terms of use, GoDaddy reserves the right to collect and retain all revenue obtained from such advertising.

The Academy’s Motion for Summary Judgment

The Academy moved, inter alia, for summary judgment on its cybersquatting claim. In pertinent part, the ACPA provides:

A person shall be liable in a civil action by the owner of a mark … if, without regard to the goods and services of the parties, that person (i) has a bad faith intent to profit from that mark …; and (ii) registers, traffics in, or uses a domain name that

  1. 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;(
  2. in the case of a famous mark that is famous at the time of the registration of the domain name, is identical or confusingly similar to or dilutive of that mark; … 15 U.S.C. § 1125(d)(1)(A).

The Academy argued that, as a matter of law, GoDaddy has “used” and “trafficked in” the accused domain names in its Parked Pages Program. In its defense, GoDaddy argued that it was entitled to ACPA’s safe harbor provision for domain name registrars. That provision creates immunity for a “domain name authority” from claims for damages “for the registration or maintenance of a domain name for another absent a showing of bad faith intent to profit from such registration or maintenance of the domain name.” 15 U.S.C. § 1114(2)(D)(iii).

Ultimately, the court sided with the Academy. In its decision, the court rejected GoDaddy’s “safe harbor” defense and noted that the provision shelters only those registrars acting solely in the “registration” or “maintenance” capacity; registrars are not immunized from liability for conduct that goes beyond mere registration and maintenance of domain names. With regard to its operation of the Parked Pages Program, the court determined that GoDaddy does not function solely as a registrar. GoDaddy goes beyond that capacity by creating webpages, placing ads and collecting ad revenue.

The court further imposed liability on GoDaddy for using and trafficking in the infringing domain names. ACPA imposes liability on persons who “use” a domain name that is confusingly similar to another’s mark “only if that person is the domain name registrant or that registrant’s authorized licensee.” 15 U.S.C. § 1125(d)(1)(D). The court held (1) that because GoDaddy was authorized by the domain name registrants to place advertising on webpages resolved from their domain names and (2) that GoDaddy was therefore an authorized licensee for that purpose, GoDaddy was not immune because it conducted itself as more than a registrar.

A determination of “use” was found in the Academy’s favor because of the nature of GoDaddy’s Parked Pages Program’s functionality. That is, when an Internet user attempts to access a domain name in GoDaddy’s Parked Pages Program for which the registrant has not specified a different server, GoDaddy’s parked page servers create a temporary webpage with paid advertising links. GoDaddy receives revenue any time a user clicks an advertisement on those parked pages. This constituted “use” within the meaning of the ACPA.

With respect to “trafficking in” the allegedly infringing domain names, the court again held in the Academy’s favor. The ACPA defines “trafficking in” to mean “transactions that include, but are not limited to, sales, purchases, loans, pledges, licenses, exchanges of currency, and any other transfer for consideration or receipt in exchange for consideration.” 15 U.S.C. § 1125(d)(1)(E). Because GoDaddy’s registrants granted GoDaddy a license to place ads on their parked webpages and retain the resulting revenue, GoDaddy was held to be an authorized licensee of its registrants and was actively involved in “transactions that include … licenses,” or trafficking per the ACPA.

The remaining factual issues in the Academy case will proceed to trial in the summer of 2015.

Future Applications

Given the procedural, substantive and costly difficulties with the current whack-a-mole approach to combating cybersquatters, the court’s opinion in the Academy case provides another possible avenue for recovery when a bad faith infringer incorporates a trademark into its domain name. Indeed, pursuing the domain registrars and hosting companies that profit from the infringing domain names, rather than the individual registrants, could provide trademark owners with potentially greater financial recovery as well as effective and efficient injunctive relief.

It must be noted, however, that the Academy’s application is thus far limited to circumstances where the registrar company actively monetizes the domain name, or benefits from the mark’s related goodwill. See, e.g., Transamerica Corp. v. Moniker Online Servs., LLC, 672 F. Supp. 2d 1353 (S.D. Fla. 2009), wherein the plaintiff trademark owner’s complaint survived a motion to dismiss because it alleged that the defendant registrar “enable[ed] a class of customers composed of fictitious entities to monetize counterfeit domain names, act[ed] as their authorized licensee and/or otherwise in concert with them, and profit[ed] with them jointly in the process.” Like GoDaddy in the Academy case, the defendant registrar company in Transamerica monetized the domain names it registered by steering consumers to other websites and shared in the profits generated by these monetized domain names. The language in the plaintiff’s complaint was sufficient to survive a motion to dismiss because it alleged much more involvement on the part of the registrar than registering the domain name and going about its business.

Therefore, before filing suit against a registrar company under the Anticybersquatting Consumer Protection Act, trademark owners, and future plaintiffs, should familiarize themselves with the terms of use of the registrar’s programs to determine the viability of successfully naming the company as a defendant.