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 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.

Next: More Legal Information

This article originally appeared in the September 28, 2000 edition of the WebReference Update Newsletter.