Considering whether a domain name registrant who prevailed in a Uniform Domain Name Dispute Resolution Policy (UDRP) proceeding possessed legitimate rights in the domain name in a subsequent court action for federal cybersquatting, the U.S. Court of Appeals for the Fourth Circuit affirmed a grant of summary judgment to plaintiff, finding that the defendant domain name registrant ceased to possess rights in the underlying domain name when it changed the content of its website to content concerning a geographical location referenced by the mark to content targeting the same type of products sold by a trademark owner under the mark. Newport News Holdings Corp. v. Virtual City Vision, Inc., Case No. 09-1947 (4th Cir., Apr. 18, 2011) (Duncan, J.)

Plaintiff Newport News Holding Corporation sells women’s clothing and accessories under the mark NEWPORT NEWS and has been in existence for more than 20 years. The plaintiff sells its products through catalogs and the internet at the domain name Newport-news.com, which it purchased in November 1997. The plaintiff attempted to purchase the domain name Newportnews.com at that time, but it had already been acquired by defendant Virtual City Vision. Virtual City Vision owns at least 31 domain names incorporating the names of geographic locations, including the domain name newportnews.com.

The plaintiff brought a UDRP complaint against the defendant in 2000, seeking the transfer of the domain name newportnews.com, but did not prevail. Acknowledging that while the domain name and trademark were identical, the UDRP panel determined that no likelihood of confusion existed because the defendant’s website explicitly provided information about Newport News, Virginia, and had no connection whatsoever to women’s fashions. The panel further held that defendant’s website provided “bona fide service offerings” consisting of disseminating city information towards tourism, finding there was a “total absence” of competition between the parties.

Approximately four years after obtaining the UDRP decision in its favor, the defendant began running occasional advertisements for women’s clothing on its Newportnews.com website. Between 2004 and 2008, the defendant’s website shifted its focus from offering information about Newport News, Virginia, to one emphasizing women’s fashions. The website also ran advertisements for women’s apparel. In 2007, the plaintiff made an offer to purchase the defendant’s domain name. The defendant rejected the offer, demanding more $1 million or an arrangement whereby the defendant would sell the plaintiff’s goods on its website for a commission.

In 2008, the plaintiff filed an action against the defendant for trademark infringement, false advertising, unfair competition, cybersquatting and related claims. The plaintiff later filed a motion for summary judgment on its cybersquatting claim under the Anti-Cybersquatting Consumer Protection Act (ACPA). The district court granted summary judgment to the plaintiff on its ACPA claim pertaining to the domain name newportnews.com, finding that the defendant possessed bad-faith intent to profit and awarding statutory damages and attorneys’ fees. The defendant appealed, arguing that the district court erred in finding that it acted in bad faith.

On appeal, the 4th Circuit upheld the district court’s finding of bad faith. While the defendant argued that it offered a legitimate service under the domain name by providing information about the city of Newport News, the court pointed to clear evidence that the defendant had shifted its focus away from providing information about Newport News and became a website devoted primarily to women’s fashion. It would undermine the purpose of the ACPA, the court explained, if a domain name registrant was permitted to profit from another company’s trademark simply by providing some minimal amount of information about a legitimate subject as the defendant did here. Further, the 4th Circuit pointed to the UDRP decision as additional proof of the defendant’s bad faith. The UDRP panel found the defendant’s use proper precisely because its business of providing city information was unrelated to the plaintiff’s clothing business. However, “in the face of the cautionary language [from the UDRP decision],” the court noted, “Defendant purposefully transformed its website into one that competed with Plaintiff by advertising women’s apparel.”

Further, the 4th Circuit further found no abuse of discretion in the district court’s award of attorneys’ fees to the plaintiff, agreeing with the district court’s finding that the defendant’s conduct was exceptional in light of the timing of the transformation of the site—the defendant had changed its website content clearly after it had been made aware by the UDRP panel that only lack of competition between the parties made the defendant’s use of the domain name legitimate. Similarly, the court affirmed the district court’s statutory damages award of $80,000, finding the amount appropriate given the particularly egregious nature of the defendant’s conduct.