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Sunday, 17 January 2010

WWW-What? On Domain Names and Cybersquatting


Dear Reader,

Introduction

The business of registering, holding and selling domain names has become an industry in itself, almost akin to real estate. In January 2005, when the tsunami tragedy shocked the world, a 20-year-old Canadian art student, Josh Kaplan, listed a domain, "tsunamirelief.com", for sale on eBay.com for USD50,000. New York Post suggested Kaplan was trying to profit out of a tragedy. A journalist, Michelle Tirado, first registered tsunamirelief.com the day the tsunami made headlines. She donated the domain to Kaplan, who claimed to represent an international relief effort. Later, Tirado realised Kaplan had listed the domain on eBay, became upset, and cried foul. Kaplan's mother said her son simply intended to donate all profit to tsunami victims, and the controversy was a misunderstanding. (Ref: The Star Online, 7th January 2005. Tsunami cybersquatter exploiting disaster, or raising funds?)

In January 2010, Chinese national, Zheng ZhongXing, was reported trying to sell the domain www.sonyericsson.com.sg to Sony Ericsson Mobile Communications for 4,000 yen (S$8,000): a profit of 19,900% from his initial investment of S$40. Sony Ericsson reportedly offered 400 yen (S$800), but Zheng refused, seeking S$3,600. Singapore Network Information Centre (SGNIC) which presided on the dispute, ordered Zheng to transfer the domain to Sony Ericsson. (Ref: The Straits Times, 12th January 2010. Cybersquatters Evicted.)

In December 2009, Yeo Yee Ling, senior policy executive at the Malaysian Domain Registry, wrote that the Kuala Lumpur Regional Centre for Arbitration (KLRCA) handles domain name disputes for the .my domain in Malaysia. To date, there have been 19 cases and 14 decisions made in Malaysia regarding domain name disputes. Many of these disputes were, and continue to be, caused by cybersquatting: the act of registering a domain name that the registrant has no connection with. Popular choices for such domain names are "names of famous people, or businesses with which they usually have no connection". According to Yeo:

Usually, cybersquatters will register several variations of these names and then sell them back to the company or person involved, or auction them for prices sometimes way above the registration cost. More unscrupulous cybersquatters use these domain names to attract business to their own sites.
(Source: The Star Online, 16th December 2009. Domain name dispute resolution in Malaysia.)

Here are some definitions of cybersquatting:
  • The Anticybersquatting Consumer Protection Act 1999 of America defines cybersquatting as "the registering of others' trademarks as domain names and profiting from the sale of those domain names or traffic through the site." (Source: AOL Legal Department, Legal Resources: Legislation: Anticybersquatting Consumer Protection Act 1999)
  • Monica Killian, PhD, wrote: "Cybersquatting is the practice of registering a trademark as a domain name with the intent of profiting from it by selling it, usually to the trademark owner. As long as the cybersquatter owns the domain name, the trademark owner cannot register its own trademark as a domain name. In this sense, the cybersquatter breaches the fundamental rights of the trademark owner to use its trademark." (Source: Murdoch University Electronic Journal of Law, Vol. 7, No. 3 (Sept. 2000). Monica Killian PhD, Cybersquatting and Trademark Infringement. Also archived at AustLII.)
  • John D Mercer wrote: "an illegal cybersquatter should be one who acquires a domain name for the sole purpose of obtaining money or other advantage from the trademark owner, with no intent or desire to use the domain name, except as an instrument toward this purpose." (Source: Monica Killian, ibid.)

Malaysian developments

Domain name disputes have cropped up in Malaysia. In the passing off case of Intel Corp v Intelcard Systems Sdn Bhd & Ors [2004] 1 MLJ 595, the first defendant, Intelcard, had registered the domain intelcardsystems.com. The presiding judge, Yang Arif Abdul Wahab Said Ahmad, JC decided:
  1. Intel, the plaintiff, successfully established that it had goodwill and reputation in the name "INTEL";
  2. The use of "INTEL" in the first defendant's company name was likely to cause confusion because the names were similar, and their businesses were in similar areas;
  3. The real test was whether, the first defendant being aware of the plaintiff's goodwill and reputation in the "INTEL" name, but still proceeding to use "INTEL" in its company name, had tried "to deceive and steal the business or commercial advantage of the plaintiff and to misrepresent a false connection and association with the plaintiff".
  4. The court was satisfied that Intel, the plaintiff, managed to prove the test;
  5. The first defendant's actions, if allowed to continue, would cause damage to the plaintiff's reputation and business;
  6. The plaintiff would suffer irreparable damage if the injunction was not granted, whereas the plaintiff could easily compensate the defendant with its large revenues;
  7. Intel's delay in taking action against the first defendant was not a bar as the plaintiff only discovered the defendant's presence online in 2002 and was trying to negotiate a settlement with the defendant (which failed).

Yeo wrote that the first reported case in Malaysia involving domain name disputes is Petroliam Nasional Bhd (PETRONAS) & Ors v Khoo Nee Kiong [2003] 4 CLJ 303:
The first reported Malaysian case involved the domain names “petronas dagangan.com”, “petronasgas.com,” “mypetronasdagangan.com” and “mypetronas.com”, where the learned judge in the High Court of Penang ruled on the issue in the context of the law of passing off in the following manner:-
“By registering domain names that contain the word “petronas”, a serious issue to be tried had arisen as to whether the defendant was making the false representation that Araneum Consulting Services (trade name of the defendant) was connected to or associated with the plaintiffs or was the owner of the goodwill in the name of PETRONAS (the statutory acronym for Petroleum Nasional Berhad). Further, the said domain names were instruments of fraud and any realistic use of them as domain names would result in passing off. Hence, the interim prohibitory injunctions sought should be granted to restrain the defendant from passing off any domain names that contain the word 'petronas.”
(Source: Malayan Law Journal [2005] 2 MLJ xxxviii. Yeo Yee Ling, Kuala Lumpur Regional Centre For Arbitration (KLRCA)–At The Crossroads Of The Domain Name System Highway)

Other Jurisdictions

Shane Simpson, senior partner of a leading Australian IP law firm, presented during a conference in 1998:

In Harrods v UK Network Services Linited et al., 1996 H 5453, Harrods was registered in the "co.uk" domain. The defendants registered the Harrods name in the American ".com " domain. The court held that use of the ".com " domain name by anyone other than the Harrods constituted trade mark infringement and passing off.

Perhaps the most important case in this area is the recent decisions of Marks & Spencer, Ladbrokes, J. Sainsbury, Virgin Enterprises and British Telecom v One In A Million [see 28th November (1997) Ch 1997 M.5403; L.5404; J.5402; V.5401; B.5421 respectively].

All of the plaintiffs have very famous names but had failed to undertake a program of defensive registration of domain names. The defendants are dealers in Internet domain names. They register names or trademarks of well-known enterprises and sell them to potential users. Clearly it is done without the permission of those enterprises. These registrations included the following:

britishtelecom.co.ukcadburys.commacdonalds.co.uk
bt.orgcellnet.netmacdonalds.com
britishtelecom.netglobalmedia.co.ukmotorola.co.uk
bskyb.netj-sainsbury.commarksandspencer.co.uk
burger-king.comladbrokes.commarksandspencer.co.uk
burgerking.co.ukleedsunited.commarksandspencer.com
buckinghampalace.orgmarconi.comnokia.co.uk
personalnumber.co.ukspice-girls.nettandy.co.uk
j-sainsbury.comspicegirls.comtandy.net
sainsburys.comspicegirls.orgthetimes.co.uk
sainsbury.comsundaytimes.co.ukvirgin.org
None of them were active sites. They were simply names registered by the defendants and available for such use.

As the judge in that case pointed out, for a dealer in Internet domain names there are only four uses to which the names can be put:

  • "The first and most obvious is that it may be sold to the enterprise whose name or trademark has been used, which may be prepared to pay a high price to avoid the inconvenience of there being a domain name comprising its own name or trade mark which is not under its control."
  • "Secondly, it may be sold to a third party unconnected with the name, so that he may try to sell it to the company whose name is being used, or else use it for purposes of deception."
  • "Thirdly it may be sold to someone with a distinct interest of his own in the name, for example a solicitor by the name of John Sainsbury or the government of the British Virgin Islands, with a view to its use by him."
  • "Fourth it may be retained by the dealer unused and unsold, in which case it serves only to block the use of that name as a registered domain name by others, including those whose name or trade mark it comprises."
The court had no trouble finding that a tort had been committed.
(Source: Shame Simpson, Name And Reputation In The Fourth Dimension. Conference paper presented at the CyberLaw Conference (Business Law Education Centre), Hilton Hotel Sydney, on 1 April 1998)

Future

A new trend shows cybersquatters now registering subdomains, unique URL's, and usernames at popular websites. NST reported that Dell, a major computer vendor, managed to register facebook.com/dell, but Jeremy Fancher, a student at Washington University, registered facebook.com/dellcomputer and plans to sell it.
(Source: New Straits Times, Tech & U section, 22nd June 2009. Keeping true identity now a battle online.)

While this does not fall within the scope of a top-level domain name dispute, it seems that the same discussions surrounding domain name disputes, and the tort of passing off, apply as well. If members of the public can be confused, and a complainant suffer economic loss from such deception (e.g. visitors to the "fake" page are directed to visit a competitor's website) it seems likely that this may eventually become an area of dispute. Some discussion on the matter is emerging:
  • In November 2008, the Anti-Phishing Working Group issued a warning that "phishers" were increasingly exploiting subdomains at free web service providers to carry out their "phishing" scams. The APWG hypothesized that factors causing this included: (a) ease of set up; (b) registration can be anonymous; (c) phishing sites can be launched quickly; (d) web service providers frequently fail to collect accurate information from users; (e) absence of formal dispute resolution methods. (Source: APWG. November 2008. By D Piscitello and R Rasmussen. Making Waves in the Phisher’s Safest Harbor: Exposing the Dark Side of Subdomain Registries)
  • In 2007, two computer science researchers at University of Cambridge examined the effect of websites taking down phishing sites. They observed that "The mean lifetime of a normalphishing site is 61.69 hours, while for rock-phish domainthe mean lifetime is 94.68 hours." The success of free web service providers in taking down phishing sites depend on user responses, awareness of such web service providers, collusion amongst the phishers, and various DNS trade-offs. (Ref: University of Cambridge. By T Moore and R Clayton. Examining the Impact of Website Take-down on Phishing.)
  • Erik J Heels, a patent lawyer, wrote that 93% of the 100 top global brands have had their brandnames poached by squatters at Twitter.com. He called for the creation of a Uniform Username Dispute Resolution Policy. (Source: Erik J Heels blog, 8th Jan 2009. How To Twittersquat the Top 100 Brands.)
  • A free web service, User Name Check, helps to check 68 (17 x 4) popular websites to see if the username has been taken.
  • Lloyd Jassin, a copyright attorney, encouraged readers of his blog to register their trademarks as usernames for accounts at Facebook, LinkedIn, and Twitter. (Source: CopyLaw.com. By Lloyd Jassin. Fighting Facebook “Name Squatters”. Accessed 19th January 2010.)

In 1999, Jacqueline Lipton, then a lecturer at Monash University, explored the possibility of domain names being treated as collateral:
The issue of property rights in domain names becomes relevant to secured financing in situations where the value of a particular business may hinge significantly on its Internet presence and associated domain name. This will increasingly be the case in the global information age. ... as trade and, commensurately, finance, become more borderless and businesses deal less in physical commodities than in intangibles such as goodwill, know-how and software, financiers will have to seek out and protect the intangible value of a business as security for a loan. A significant part of such protection will likely be an attempt to gain some sort of security over the relevant domain name as a significantly valuable part of a business operating over the Internet.
(Source: Jacqueline Lipton, What's in a (Domain) Name? Web Addresses as Loan Collateral. 1999 (2) The Journal of Information, Law and Technology (JILT).)

More than ten years have passed, but the practice of using domain names as collateral does not seem to have caught on. Perhaps financiers realise that the value of a domain name is tied to continuous innovation and successful, trouble-free running of the website, and not merely the domain name in itself. When the Internet first went mainstream in the 1990's, websites such as Lycos, Excite and Yahoo were very popular. Today, some of these websites seem to have declined in popularity as Web 2.0 functionality, convergence and social interactivity, become criteria for success. In preparing this article, it was found that Lycos was sold to a Spanish company in 2000 for $5.4 billion. After the Internet bubble burst, Lycos was resold to a South Korean company for $95.4 million in 2004. (Source: Wikipedia, entry on Lycos. Accessed 19-1-2010. Alternative source: Wired.com, 8th Feb 2004. South Korean Company Buys Lycos.)

Readers should remember that Malaysian law and American law are quite different. Having said that, those still keen to use their domain name as collateral can read:
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