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WebRef Update: Featured Article: Avoiding Legal Trouble When Registering Domain Names | 2

Avoiding Legal Trouble When Registering Domain Names

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 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," 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 www.gigalaw.com/articles/domainnames.html.

About the author:

Doug Isenberg, an attorney, is the editor and publisher of 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.

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This article originally appeared in the September 29, 2000 edition of the WebReference Update Newsletter.


Comments are welcome
Written by Doug Isenberg and

Revised: September 29, 2000

URL: http://webreference.com/new/domainlegal2.html