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((((((((((((((((( WEBREFERENCE UPDATE NEWSLETTER ))))))))))))))))) September 28, 2000


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1. CONTEST: Signup and Win! 2. FEATURED ARTICLE: Avoiding Legal Trouble When Registering Domain Names 3. NET NEWS: * Mac Cube: Is It All It's Cracked Up To Be? * Clouds Mar Sun's UltraSPARC III Launch * MP3.com Kicks Off Million Email March * My Phone/PDA Is Better than Yours * Olympic athletes, fans connect via e-mail

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This week, Doug Isenberg responds to last week article, "How to Create Profitable Domain Names" from a legal view. Is any form of domain buying and selling cybersquatting? Read on and find out what Doug, and the law, have to say about it.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2. FEATURED ARTICLE: Avoiding Legal Trouble When Registering Domain Names

In the WebReference article, "How to Create Profitable Domain Names," the author provides some interesting advice for those who would like to buy and sell domain names. Although the author insists that he does not condone "cybersquatting" or trademark infringements, any would-be domain name speculator should be aware that the practice of registering Internet addresses for profit can be a legally risky endeavor.

Now, don't get me wrong. Although I am an attorney, I do not always side with the big corporations over the individual players. Indeed, my personal perspective on trading in domain names is not relevant to this article. Rather, what I have done here is respond to a few misstatements or mis-characterizations in the earlier article simply by providing the facts. I don't make the law, I'm just reporting what it is.

>Issue #1:

As I noted above, the author in the previous article said he is:

"not talking about 'cybersquatting'." However, "cybersquatting" is a relatively new term, which may mean different things to different people, including judges.

In one of the first cases to address the issue, a judge defined cybersquatters as "individuals [who] attempt to profit from the Internet by reserving and later reselling or licensing domain names back to the companies that spent millions of dollars developing the goodwill of the trademark."

In another case, a judge said cybersquatters are those who "merely 'squat' on their registered domain names until someone else comes along who wishes to use them... and seek to make a financial return by exacting a price before consenting to allow others to use the domain names on which they have chosen to 'squat.'"

And in yet another case, a judge defined a cybersquatter as "an entrepreneur who made a business of registering trademarks as domain names for the purpose of selling them later to the trademarks' owners."

There are similarities and differences in the above definitions, but one thing should be clear: Registering a domain for the purpose of selling it -- or attempting to sell it -- to another could be considered "cybersquatting." And cybersquatting can, obviously, raise legal issues and result in lawsuits.

>Issue #2:

The article on how to profit from domain names suggested that you should "perform a free trademark check" with an online service before registering a domain name. Although this is good advice, it is incomplete.

First, many of the free online trademark search services are not up-to-date. In other words, a trademark application that was filed yesterday - or, perhaps, even last month - may not yet have made it into the service's database. So, just because a search returns no results does not mean someone else does not claim the trademark.

Second, many of the free online trademark search services do not offer sophisticated search techniques. So, if you conduct a search for the trademark "Hewlet Pakard," for example, it's unlikely that the search service will tell you about all of the registrations for the trademark "Hewlett-Packard." Again, you'll miss out on knowing about some important trademarks.

Third, many of the free online trademark search services only contain information about trademarks in the United States. But since the World Wide Web really is worldwide, you may want to know whether someone in another country has trademark rights before you register your domain names. Similarly, many of these services only have data on federal registrations, not state registrations. (Ed: Tunisia for example)

Fourth, and finally, even if you could find a trademark search service that located all registered or pending trademarks in every jurisdiction in the world and was up-to-date, it's important to know that a business can acquire trademark rights even if it has never filed a trademark application. In the United States, trademark rights are dependent upon usage of the trademark, not upon having an application or registration. So, there are plenty of trademarks out there that will never show up in many trademark searches.

Unlike a free online trademark search service, many attorneys who practice in this area of the law conduct sophisticated (and thus more expensive) trademark search procedures and can provide legal analysis about the results that some others cannot.

>Issue #3:

The author of the article on profiting from domain names implies that it's okay to register "generic" domain names. He says, "A generic term is simply a term that represents a particular subject or industry without referring to individual brands." A better definition of what constitutes a generic word is one that is a common descriptive name of a good or service. To determine whether a word is generic requires that you look to see with what goods or services it is used in connection. For example, "apple" is generic when used to refer to the fruit that hangs on trees, but it is not generic when used to refer to Steve Jobs's computer company. The point is this: It's usually impossible to say for certain whether a word is generic unless you know something more.

This is important in the context of domain names because, rightly or wrongly, some registrants are losing their domain names to others even though the registrants have argued that the names are generic. For example, in recent rulings, domain name registrants have lost cases involving the domain names crew.com, (to the J. Crew clothing company) and esquire.com (to the magazine publishing company). (For my perspective on the esquire.com decision, see http://www.gigalaw.com/articles/isenberg-2000-07-p1.html). Yes, other disputes over seemingly "generic" domain names, including sting.com and cello.com, have been decided the other way, but again the point is that you cannot assume any domain name is generic and therefore free from a potential lawsuit.


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>Issue #4:

The author of the previous article suggests that you affix a single-letter prefix to a word to create a new domain name. This may work well for some domain names, but it certainly could lead to trouble for others. I doubt you'll have much success in trying to sell eCocaCola.com, iMicrosoft.com or uCompaq.com. Even affixing the letter to words in the dictionary could be problematic: eAmazon.com, iWired.com, ePalm.com, etc.

>Issue #5:

The author of the article on making money from domain names seems to think that because "branding firms" like to create trademarks by piecing together two existing words, some companies wouldn't mind paying you for the matching domain name. He writes: "If a name is going to cost $1 million to brand, what's another $20,000 to purchase it in the first place?"

True, many companies will find it easier just to buy a domain name from someone who's already registered it rather than go to court over it. Not long ago, domain name registrants who set their price low enough could sometimes guarantee a sale because the price would cost the buyer less than going to court. But now, a new mandatory arbitration procedure for many domain names, the Uniform Domain Name Dispute Resolution Policy ("UDRP"), makes it inexpensive to pursue a cybersquatter. As a result, many companies refuse to pay even moderately high prices for a domain name if the business has a legitimate claim of trademark rights. So, instead of paying the $20,000 asking price, many companies will file an arbitration proceeding instead.

>Issue #6:

The author thinks that registering domain names is a risk-free proposition. "Give it a go, you've got nothing to lose, except the registration fees of course," he writes. This is far from true. If you're served with a complaint under the UDRP, you'll have to spend valuable time - and, perhaps, attorneys' fees - responding to it (or face a default judgment). The same applies, on an even larger scale, if you're sued in federal court for violation of the new Anticybersquatting Consumer Protection Act ("ACPA") (see http://www.gigalaw.com/library/anticybersquattingact-1999-11-29-p1.html). And even if you don't hire your own attorney, the company that sues you could end up asking the court to force you to pay damages or even their lawyer fees. It's not unheard of.

Indeed, one attorney has even recommended that trademark owners file federal lawsuits when appropriate against domain name registrants - rather than pursuing the sometimes less-expensive UDRP route - because of "the greater burden and expense on the domain name registrant of litigating in federal court." (See "New Domain Name Dispute Procedure Takes Effect," http://www.gigalaw.com/articles/stewart-2000-02-p1.html).

>Issue #7:

The author himself said he registered nearly 200 domain names over two months to test his techniques. However, this type of practice is exactly what could lead to legal trouble.

The ACPA makes it illegal to register a domain name with "bad faith intent to profit" from it. In determining whether the "bad faith" exists, one factor the Act considers is the registrant's "registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names."

Similarly, under the UDRP, arbitrators have considered registration of multiple domain names evidence that a person may be a cybersquatter.

Granted, many people and businesses register many - perhaps hundreds - of domain names legitimately, to represent their various companies, divisions, products, services and variations thereof. For them, the legal exposure could be low. But for those who register multiple domain names solely for the purpose of selling them to others (particularly if you fail to conduct a thorough trademark search in advance), the legal exposure could be greater.

>The Bottom Line:

There's no doubt that many people have made money from buying and selling domain names. But, the few reported cases of high prices unfortunately have convinced many that trading in domain names can be a sure ticket to riches. Rather, if done without awareness of the legal issues involved, it could be a ticket to court.

This article does not address every legal issue relating to domain names; it does not address legal issues outside of the United States and the UDRP policy; and it does not offer legal advice that you should rely on. For much more on domain names and the law, you should consult an attorney with whom you can discuss your specific situation. Also, see the list of additional articles at http://www.gigalaw.com/articles/domainnames.html.


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About the author:

Doug Isenberg, an attorney, is the editor and publisher of GigaLaw.com (http://www.GigaLaw.com). a Web site that provides legal information for Internet professionals. The site contains information not only on domain names but also on copyrights, patents, privacy, technology contracts, free speech in cyberspace, software licensing, nondisclosure agreements and much more. E-mail him at: disenberg@GigaLaw.com.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 3. NET NEWS: Mac Cube: Is It All It's Cracked Up To Be?, Clouds Mar Sun's UltraSPARC III Launch, MP3.com Kicks Off Million Email March, My Phone/PDA Is Better than Yours, Olympic athletes, fans connect via e-mail

>Mac Cube: Is It All It's Cracked Up To Be?

Apple Computer is fending off criticism its stylish Power Mac G4 Cube is marred by cracks. But are the hair-thin lines the defects they appear to be? They insist the blemishes are not defects but lines formed through the normal course of manufacturing. http://news.cnet.com/news/0-1003-200-2885165.html CNet.com, 000928

>Clouds Mar Sun's UltraSPARC III Launch

Already 18 months behind schedule, Sun's next-generation processor is plagued by technical glitches at a high-profile demo in New York. Sun unveiled new hardware and software Wednesday while top executives outlined what the company calls its "Net Effect" strategy. http://www.zdnet.com/zdnn/stories/news/0,4586,2634331,00.html ZDNet.com, 000927

>MP3.com Kicks Off Million Email March

MP3.com has launched the Million Email March, in support of a bill that was introduced this week in Congress. The act (HR5275), if passed, would permit consumers who purchase compact discs to store and listen to their music online by first demonstrating lawful possession of the CDs, without incurring a per-listen charge. http://www.internetnews.com/streaming-news/article/0,,8161_471511,00.html InternetNews.com, 000928

>My Phone/PDA Is Better than Yours

With Handspring and Palm preparing to market devices that will converge the technologies of cellular phones and personal digital assistants, it appears the race to be first is on. But such devices already exist. http://www.wired.com/news/business/0,1367,39065,00.html Wired.com, 000928

>Olympic athletes, fans connect via e-mail

Continuing our "Surf Shack" coverage ... Lenny Krayzelburg's an Internet fanatic, and you can email him and other Olympians thanks to IBM's FanMail project. http://www.usatoday.com/olympics/sydney/tech/fs14.htm USA Today, 000928

That's it for this week, see you next time.

Andrew King Managing Editor, WebReference.com update@webreference.com

Catherine Levy Assistant Editor, WebReference.com clevy@internet.com


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