Fourth Circuit Weighs Interpretation of Cybersquatting Act
Decision will intensify a circuit split on 'registration' issue
In 1999 Congress passed the Anti-cybersquatting Consumer Protection Act (“ACPA”), a law created to address the rapidly expanding practice of domain name piracy – where domain name traders purchase domains containing established trademarks and then sell or ransom those domains to the trademark owners for a substantial payday.
Example: You own the trademark for [blank]. Your business is growing, and you are building your brand. While you are busy building your business, someone registers ‘yourtrademark.com’ knowing that if you are really dedicated to your trademark, the .com domain name of that mark is the most valuable ‘real estate’ you can own online. They reach out to you offering to sell you the domain for $100,000.
That practice of purchasing domains and giving trademark owners the option of either paying significant amounts or going without a desired domain name is known as ‘cybersquatting,’ and, in the 1990’s, capitalized on the intersection between the burgeoning internet’s exponential rise in domain names and ever-increasing numbers of entities trying to secure rights in distinctive trademarks.
The ACPA made the practice of taking a distinctive trademark and registering the corresponding domain name (when you are not the trademark owner) illegal provided that the domain was created in bad faith. Under the Act, trademark owners can file a lawsuit against a person who registers a domain name in bad faith – and, if successful, the mark owner can have to court transfer the domain from the cybersquatter to the trademark owner.
Even though the ACPA dates to 1999, there have been surprisingly few high-level court cases addressing important questions. Admittedly, what is ‘important’ is in the eye of the beholder and since I advocated for a particular outcome in a recent appeal, my bias is on the table.
One of those important questions is what the ACPA means in providing that a trademark owner can take legal action against a person who ‘registers’ a domain name. Domain name owners are familiar with initially registering a domain name. They are also familiar with ‘re-registration’ of domains – possibly through a periodic click of a box, or because they have purchased a domain from another party and must update registration information accordingly.
Who can trademark owners sue? The person who creates a new domain and registers it? The person who buys an existing domain and updates registration information? Both?
The issue is whether ‘re-registration’ is the same as ‘registration.’ They both contain the word ‘registration,’ after all. But is that what the ACPA’s chief concern, the words that are arbitrarily used to describe certain events?
In the Ninth Circuit’s GoPets decision,[1] the Court said that it is not the word ‘registration’ that the ACPA is concerned with, it is the Act of ‘registering’ a domain – and that act of registration is different that what occurs when an existing domain is re-registered. Registration creates a domain and puts it into existence. Re-registration does not put anything into existence, it merely maintains a domain. Why does that matter?
The Ninth Circuit stated that any reading of registration that simply treats registration and re-registration as the same risks taking someone’s property and making it unalienable - making it something the person cannot sell or transfer as they wish. The Ninth Circuit applied traditional property law reasoning to a domain name - and traditional rules of property law are that someone who owns property can all the rights they have in property to someone else. The Ninth Circuit said that because someone who has registered/created a domain name in good faith has the right to use that domain name without fearing that a subsequent trademark registrant will come along and demand that a court give the domain to them, than a domain owner should be able to transfer that same ability to own and use without fear to someone else - regardless of whether it is a related party or unrelated third party.
Perhaps some hypothetical situations will illustrate the question:
Examples: You register a new domain. After you create the domain, someone registers a similar trademark for their business. That trademark owner is not able to sue you under the ACPA because you did not register the domain in bad faith – their trademark did not exist at the time you created your domain.
You periodically re-register that domain and update information in the domain name registry. Under the ACPA, the trademark owner still cannot sue you and attempt to take your domain, because you did not act in bad faith when you initially created the domain, and you have continued to be the domain owner through re-registration.
You sell or transfer your domain to a business you own or to someone related to you and they must re-register the domain (update the registry with the new ownership information). Is that re-registration by a new person a registration that allows a trademark owner to sue you for cybersquatting?
You sell or transfer your domain to some a party, and they have to re-register the domain (update the registry with the new ownership information). Is that re-registration by a new person a registration that allows a trademark owner to sue you for cybersquatting?
If you followed the Ninth Circuit’s logic, there is one answer that applies to all those examples – registration refers to creation of the domain. Since the domain was created when there was no conflicting trademark, that domain – as long as it does not go defunct – can exist and not be cybersquatting, no matter whether it is transferred, and registrations are updated or not.
If you follow courts that disagree with the Ninth Circuit, any act, if it is called registration, triggers a trademark owner’s ability to sue. But Courts that do not use the Ninth Circuit’s straightforward test differ in how they think about re-registrations. For example, some courts, like the District Court in my current case, believe that re-registrations are not the same as registrations if the domain name is being transferred to a ‘related entity.’ So, if you own a domain and sell or transfer it to your brother or a business you own, then the resulting re-registration would not be a ‘registration’ giving a right to sue (because the identity of the domain owner remains the same or fairly close to the same …).
An interesting question unanswered by Courts equating registrations and re-registration is whether domain name owners could end ACPA lawsuits altogether by simply calling the process of creating domain names something different. If the process for creating a domain was designated an ‘origination,’ does that mean that no registration has occurred? What if the original step were deemed an origination or creation and the periodic step was deemed ‘renewal,’ what happens to the Act if there would no longer be a registration?
That interpretation of ‘registration’ under the ACPA has not been taken up by the United States Court of Appeals for the Fourth Circuit … until now. Last Week, in The Prudential Insurance Company of America v. Shenzhen Stone Network Information Ltd., the Fourth Circuit took up an argument that goes right to the heart of what the word ‘registration’ in the Act really means – if it means any event arbitrarily deemed a registration, a party is out of luck, their domain name stripped away and transferred to someone else, and their investment in the domain name evaporates. If; however, the Court determines that ‘registration,’ in context, refers to the creation of domains and not simple updates of registration information or renewals, the questions courts must ask in ACPA cases become much more objective – rather than ask endless questions about the identity of domain owners or transferees and attempting to explain why a transfer to a third party is conceptually any different than a transfer to a sibling for purposes of establishing cybersquatting liability or why a law should be so formulaic that a change in terms could thwart the entire purpose of the Act.
You can listen to the argument in the Fourth Circuit (Case No. 21-1823) here.
[1] GoPets Ltd. v. Hise, 657 F.3d 1024 (9th Cir. 2011).