Great Blog Post - Domaining Due Diligence

[marcorandazza]

http://www.predictivedomaining.com/2008/12/21/domain-trademark-disputes/

I recommend it because I think that it provides valuable advice to domain investors who might wish to run their businesses without legal entanglements. It provides good (not perfect, but pretty damn good) advice on how to do due diligence before acquiring a domain name.

Many domainers already know this and do this kind of due diligence. However, new entrants into the industry would do well to
read it -- and you can never be too experienced to review the fundamentals.

One thing I would add to all of the advice in that article is this: If you follow his advice, keep records that you took each of the steps he recommends. Those records will be of tremendous value in any UDRP defense. "Willful Blindness" has been held to constitute "bad faith" in UDRP proceedings, but documented proof that you took the steps that he suggests will go a long way in defending a domain that becomes the subject of a dispute.

 

[Biggie]

Thanks for the post.

 

[marcorandazza]

My pleasure.

 

[EnricoSchaefer]

Marc:

I love the way your post focuses on the "willful blindness" issue since that seems to be the model most domainers take. They may not in fact know about a particular trademark, but they fail to do any due diligence prior to registering a domain. Even dictionary word domain names such as "apple.com" can only be used for certain purposes.

Domainers need to learn that their most valuable domains require due diligence prior to registration. Virtually every word out there has some trademark issue associated with it. This means that domainers need to develop a legitimate use of the domain which does not infringe third party trademark rights. These matters are rarely black and white. It is all a question of risk-reward.

Domains which are going to be parked almost always have a risk of transfer under the UDRP unless they are managed properly. Chances are, your parking software will tend to generate ads gravitating towards someone else’s trademark rights. If you don't exclude those ads, you essentially have decided that you can live with a UDRP transfer order moving your domain to another registrant. This may be OK for lower value domains. But it is certainly not OK for domains with five and six figure value. Here's some additional links to the parking page dilemma:

• The Parking Page Dilemma: Frank Schilling loses chillibeans.com domain under UDRP
• "Low Value" Domain Parking Pages Results In Another Lawsuit Against Google By Advertisers
• Excluding Keyword Categories From Your Parked Pages In Order To Avoid Cybersquatting Violations

And if you do receive a trademark infringement letter, you might want to check out this post about failing to respond to a threat letter under the UDRP.

• Failure to Respond To Trademark Threat Letters & Use of Privacy Services Can Support a Finding Of Bad Faith

Great post Marc. Clearly, domaining involves a lot more today than it did several years ago. Serious domainers need to understand that their business model requires a high level of sophistication than most are willing to give it.

 

[jberryhill]

Frank Schilling loses chillibeans.com domain under UDRP

Umm... the domain has not been "lost", as one might notice by checking the WHOIS. This one is being litigated.

I do not need to perform a trademark search in order to register, say "HotDogCondiments.com" to advertise and sell hot dog condiments. There might be a zillion trademarks that exist for "Hot Dog" or related terms. If my intention is to use the domain name to advertise and sell hot dog condiments, then what am I going to do if I find out that "HOT DOG" is a registered trademark for clothing?

The answer is nothing. Knowing that there is a non-descriptive registered trademark is not going to alter my behavior one iota.

 

[marcorandazza]

John,

Maybe you don't *need to* perform the TM search, but for the 39 seconds it would take to do it, plus the 20 minutes max it would take to scan through any relevant registrations, why not do it?

Perhaps you come across a TM for "HOT DOG" for clothing. You put in your notes, "examined Hot Dog clothing mark, determined that it did not conflict with anticipated use of providing links to Hot Dog condiments."

Enrico has it exactly right when he writes, "Serious domainers need to understand that their business model requires a high level of sophistication than most are willing to give it."

The Chilibeans case is a great example. If the domain is worth enough to file a federal lawsuit over, it should have been worth enough for a 30 minute use and registration audit -- which would have meant virtually certain victory in the UDRP case -- or the case never being filed in the first place.

 

[EnricoSchaefer]

John: Of course, you care going to make sure you don't offer up PPC links in clothing categories, or develop the domain for products or services related to clothing assuming you know that might be a trademark problem. What I think you are saying is that if you use domains in their descriptive/generic sense, you should be ok. But that isn't always true either. The trademark office allows registrations of generic/descriptive words if secondary meaning is established after 5 or so years.

Domainers need to better understand where trademark rights might exist, so they can make more intelligent use of their domains, and reduce risk of transfer or suit. For the PPC model, your parking software may start to serve up ads for "HotDog" sunglasses, for instance - which may have hypothetically trademark rights associated with it - if you aren't proactive.

 

[Biggie]

my one issue about "due diligence"

which may sound like a silly point is...

why don't companies due some diligence in renewing their domain names.

when the name drops, then they want to prosecute you for registering/catching the name.

so i see a contradiction in giving domain ownership to tm holders in cases, when domains are not considered tangible property

i ain't no lawyer, but i look like a guy who plays one on tv

 

[marcorandazza]

Well, you're using "diligence" in its English language meaning - not its legal meaning. But, I see what you're saying. One side of the coin is "finders keepers."

On the other hand, if you drop your wallet in the bank, does it "belong" to the guy who finds it?

Domains may not be considered to be tangible property, but under the Kremen case (and many that followed) they are considered to be tangible enough that property rights vest in them.

 

[jberryhill]

The Chilibeans case is a great example. If the domain is worth enough to file a federal lawsuit over, it should have been worth enough for a 30 minute use and registration audit -- which would have meant virtually certain victory in the UDRP case -- or the case never being filed in the first place.

No, it wouldn't have changed the result in that case, and would not have prevented the case from being filed.

Among other things, there was no application filed in the US at the time the domain name was registered.

The claim is premised on an EU application for a figurative mark for eyewear. Knowing that, Name Admin would have still bought the domain name and targeted it to "food and beverages". There would have been zero difference in the behavior of either party if the mark had been known.

A good many cases are based on marks registered in countries which do not have free online databases. With Name Admin alone, the cases involving geopack.com and joystick.com come to mind. Those cases were both premised on French trademark registrations and there is no free online access to French trademark registrations.

Another example that leaps to mind is pig.com. In that case, the complainant determined the keyword targeting of the domain name, and bid up its ad to appear on the parking page. That is by no means an isolated incident, by the way. It does not matter how the page is targeted - if the TM claimant can determine (a) the targeting, and (b) the ad system, then they can and will game the system to make either their own ads, or fake ads for their competitors appear in the results.

You guys are two moves behind the checkers game here.

But that isn't always true either. The trademark office allows registrations of generic/descriptive words if secondary meaning is established after 5 or so years.

No. There is no such thing as acquired distinctiveness in a generic term, and there is a substantial distinction between generic and descriptive.

If the domain is worth enough to file a federal lawsuit over, it should have been worth enough for a 30 minute use and registration audit

Two additional things there.

Where are you getting this notion of a "federal lawsuit"? In the case to which you refer, none of the complainant, the respondent nor the registrar are located in the United States, and the jurisdiction chosen by the complainant under Rule 4(k) is not the United States. There is no federal lawsuit.

Secondly, if you are going to run through a list of 10,000 drop names a day (this was back when names really dropped), pick out a couple of hundred that may have value, and get the drop engine going at 2 in the afternoon, then...

...30 minutes? Per name?

Ultimate Search developed and operated a portfolio of over 150,000 names between 1999 and 2004 and sold out for $164M. That's five years.

At 30 minutes per name, working around the clock seven days a week without stopping to pee, that's eight and a half man-years.

Buying a portfolio of 1000 names would take 21 straight days, and a kilo of meth.

...or were you not thinking of checking every national and regional online TM database, and just limiting yourself to the USPTO.

After a while, I'll admit that one gets pretty good at navigation TM office databases in any of the five or six languages I've had to navigate them in, but then you have the oddball ones, such as the UK database which for some reason tends to be open during UK daylight hours - even though it's an online database.

And, finally, you've spent enough time on these forums to know that more often than not, someone sees a "live" something-or-other in the USPTO database, and they have zero idea what they are looking at.

On the other hand, if you drop your wallet in the bank, does it "belong" to the guy who finds it?

Try not paying the lease on your apartment, and then coming back to ***** at the next tenant after you are evicted.

 

[marcorandazza]

John, your argument boils down to 1) there will still be some unjustified cases, and 2)
hypothetical anomalies disprove the rule, and 3) It is too haaaard to comply with the law.

1. Unjustified cases -- yes, there will always be unjustified and frivolous cases in any legal system. I think your lycralovers.com case is one of the best examples. That doesn't mean that nobody should try and comply with the law, and deal with the unjustified cases (and bad decisions) as they come.

2. Anomalies -- "Willful Blindness" doesn't mean you didn't take *every last possible precaution* -- it means not taking any, or failing to take reasonable measures. Yes, there may be a yak herder in Mongolia who only speaks Mongolian, but he happens to have a Timex/Sinclair computer and a wifi connection. He registers the domain name corresponding to his word for yak feces to put up a site about yak feces. He googles the term in Russian, Chinese, and English, checks the USPTO and the Mongolian PTO, but the term also is a registered Arabic language trademark in Mauritania. I don't think he would be held to be willfully blind.

Reasonable measures are very easy to take.

3. It's too haaaard. No it isn't. The rules are relatively clear. If you register 10,000 domains, you can either a) audit them all in a reasonable manner, b) not do so and suffer the predictable consequences, c) get creative.

By "get creative," I can think of a number of solutions right off the top of my head. You could do triage and work your way down the list from most profitable to least. If you lose a domain that makes you ten cents a year, then you lose it. There are technological solutions too, database matching, or even spot-checks would help show a lack of willful blindness. There are solutions that I haven't even thought of, but anyone smart enough to figure out how to make money off of bulk drop registrations has the brains to come up with a way to avoid conflicting with the rights of others. The fact is, you can't just be creative with expanding your own rights and profits and then say "but it's too haaaaard" when you're asked to be responsible for your business model conflicting with existing rights.

You're thinking inside a box that you drew yourself -- when indeed there is no box.

With respect to the aside about wallets and apartments -- your analogy fails. Nobody comes home and says "gee, I forgot to pay my rent?" The analogy would be forgetting to pay your electric bill, so your utilities are not only shut off, but all your appliances are removed from the house.

 

[jberryhill]

No, Marc, my comments boil down to pointing out the pat and smug assertion that there is some way to be "safe"; and your misunderstanding of the relevant facts in the chillibeans.com dispute. There is not. You also vastly underestimate people's ability to understand the various sorts of things that might even be found in the USPTO database.

On the subject of abandonment of a domain name by non-payment, this is an oldie but goodie:

http://www.wipo.int/amc/en/domains/decisions/html/2002/d2002-1167.html

Whilst the Panel is sympathetic to the plight of Complainant in light of the evidence in the record indicating that the disputed domain name was made available for registration after Complainant’s renewal payment apparently was paid and after Complainant was informed that its registration had been renewed, Respondent is not shown to have been responsible for that conduct.

And this one is more recent:

http://www.wipo.int/amc/en/domains/decisions/html/2008/d2008-1422.html


In the case of the disputed domain name <joystick.com>, the Respondent claims to have bought it at an auction of abandoned domain names. Furthermore, the Respondent’s research showed that the name was abandoned by a predecessor of the Complainant. There is no assertion by the Complainant that this abandonment was in error or in any way inadvertent. In these circumstances, the Panel believes that the Complainant cannot sustain a contention that the Respondent bought (or indeed registered) this disputed domain name in bad faith.

A trademark owner would not typically abandon a domain name corresponding to its mark, and then claim that a subsequent purchaser acted in bad faith by acquiring that name. This is particularly true when the name is a generic word like “joystick.” The Panel concludes that it appears likely that the Respondent reasonably determined that the disputed domain name, <joystick.com>, composed of a simple English language term, was available for use on a generic basis in a lawful manner (see the discussion of the Respondent’s business in the section above), and as it does not appear that the Respondent decided to obtain revenues illegitimately through baiting Internet users based on confusion with the Complainant’s trademark which (from the evidence of record) is hardly world famous. Ergo, as the burden of proof lies with the Complainant, the Panel must favor the Respondent’s position in this instance.

As far as coming home and realizing you didn't pay the rent - it is a frequent flier of a claim in UDRP proceedings....

http://www.adrforum.com/domains/decisions/114434.htm

Complainant claims that Respondent has intentionally attempted to divert Internet users to competitors and that Respondent's registration of the disputed domain name capitalized on an error on Complainant's part in failing to renew registration of the domain name, which Complainant had originally registered in 1997. Respondent waits for domain names incorporating common words, generic terms, short terms and useful phrases to be released after their registration has lapsed. Then Respondent immediately registers those names and uses each of them to host a generic portal web site, presumably gaining revenue from banner advertisements and affiliate links. This activity has not been found to be bad faith registration or use under the UDRP unless the selection of the domain name and the manner in which it is used are related to its correspondence to Complainant's trademark. It has been held that a party is entitled to conduct a business of capturing generic domain names which become available in the marketplace, often through failure to renew registration. See Canned Foods Inc. v. Ult. Search Inc., FA 96320 (Nat. Arb. Forum Feb. 13, 2001); First American Funds v. Ult. Search, D2000-1840 (WIPO Apr. 20, 2001); GLB Services Interactivos S.A. v. Ultimate Search, Inc., D2002-0189 (WIPO May 29, 2002).


Each of those cases, and the ones cited in the decisions - joystick.com, snowboardsforsale.com, mutineer.com, paparazzo.com, and groceryoutlet.com were based on a claim of entitled to the domain name by a prior registrant who had not renewed the domain name.

 

[Biggie]

I'm loving this

as i read the posts, i can picture you guys debating the issues in court.

 

[marcorandazza]

No John, my assertion is that there is a way to avoid being willfully blind. You seem to think that since there is no perfect way to immunize a domain from challenge, that no domainer should take any measures to do any due diligence.

I don't know where this non-payment red herring came from - I guess that when you see your central argument unraveling, running for the shelter of a red herring is a clever maneuver. I happen to prefer Prof. Wilson's analysis in World Wide Commerce Corporation v. WebContents, Inc., Claim Number: FA0712001124467.

 

[draggar]

why don't companies due some diligence in renewing their domain names.

when the name drops, then they want to prosecute you for registering/catching the name.

so i see a contradiction in giving domain ownership to tm holders in cases, when domains are not considered tangible property

i ain't no lawyer, but i look like a guy who plays one on tv

I don't think this is too uncommon - look at some WIPO cases and you'll see the same domain come up 2-3 times in a 5-10 year span. The TM owner "wins" the domain then lets it drop. IMO this should clear any infringement cases in the future (unless it is an obvious TM issue) since I don't know if any registrar that doesn't allow automatic renewal.

Isn't Addidas (sp?) very guilty of this?

I'm loving this

as i read the posts, i can picture you guys debating the issues in court.

Celebrity death match! Marc Randazza in one corner, John Berryhill in another! But I agree, this thread is a great read. I love a good debate!

 

[marcorandazza]

I don't think this is too uncommon - look at some WIPO cases and you'll see the same domain come up 2-3 times in a 5-10 year span. The TM owner "wins" the domain then lets it drop.

It is a sign of foolishness to let your domain drop -- and I know that some registrars automatically catch it, and then make you pay a pretty hefty fee to get it back. Well, $100 or so, which is only "hefty" in comparison to a $7 registration.

I don't see much issue with that, but I do have a problem with an inadvertent drop turning into a "finders keepers" situation. The case I referenced above is here: http://www.adrforum.com/domains/decisions/1124467.htm

While it is clearly recognized that anyone has the right to purchase and make immediate or planned use of an available, non-confusing domain name that is legitimately offered for sale, Respondent registered the Domain Name after Complainant had inadvertently allowed the Domain Name to lapse, subsequent to eleven years of continuous use in commerce. Registration of a domain name under these circumstances is evidence of a lack of legitimate rights or interests in a domain name. See Zappos.com, Inc. v. Turvill Consultants, FA 404546 (Nat. Arb. Forum Feb 28, 2005) (finding that “[t]he fact that Complainant had previously held the domain name registration and has mistakenly allowed it to expire is further evidence that Respondent lacks rights and legitimate interests in the domain name under Policy ¶4(a)(ii).”); see also Am. Anti-Vivisection Soc’y v. “infra dot Net” Web Servs., FA 95685 (Nat. Arb. Forum Nov. 6, 2000) (holding that complainant’s prior registration of the domain name was a factor in considering rights and legitimate interests in the domain name).

....

Complainant’s previous registration and use of the disputed domain name before the registration inadvertently lapsed coupled with Respondent’s immediate registration and refusal to transfer further supports that Respondent’s registration and use of the domain name was in bad faith pursuant to Policy ¶ 4(a)(iii). See Florists’ Transworld Delivery, Inc. v. Domain Strategy, Inc., FA 113974 (Nat. Arb. Forum June 27, 2002) (“Complainant previously held the contested domain name before an inadvertent error allowed the registration to lapse. Respondent apparently took advantage of the presented opportunity and immediately registered the lapsed domain name. Respondent’s opportunistic actions exhibit bad faith under Policy ¶ 4(a)(iii).”); see also RH-Interactive Jobfinance v. Mooburi Servs., FA 137041 (Nat. Arb. Forum Jan. 16, 2003) (finding that the respondent’s registration of the domain name “immediately after Complainant failed to timely renew the domain name registration” was evidence of bad faith).

While “finders, keepers-losers, weepers” is a quaint and classic saying it is also an oversimplification of the underlying law. Actually the finder takes as to all the world except the true owner, or the prior peaceable possessor. WWC Corp. provided sufficient evidence to show that it fit one of the preferred categories and Respondent, who rather unconvincingly claims to be an innocent finder here, is the party that must “tear” itself away from the disputed domain name.

I think Prof. Wilson was a little overly harsh in his language in this decision, but I also think he got it right.

If we want to look at this issue from a domainers vs. mark holders divide, Wilson's approach greatly favors domainers. If a trademark holder loses a domain through carelessness, the rights in the trademark will likely allow the mark holder to get the domain back. On the other hand, a domainer would have less "rights," and would need to rely upon Wilson's language, he finder takes as to all the world except the true owner, or the prior peaceable possessor.

 

[EnricoSchaefer]

No. There is no such thing as acquired distinctiveness in a generic term, and there is a substantial distinction between generic and descriptive.

True. But courts often times get it wrongs so you can't count on your interpretation as the lawyer. The Judge might disagree. Further, the word 'apple' is neither generic nor descriptive of computers. So there is often danger where you might not suspect.

I agree with John that some companies register so many domains that due diligence becomes challenging. But for the highest value domains, it is worthwhile. And you might not be able to catch the French trademarks and insulate against every risk, but that does not mean that risks should not be reduced where possible. In Chilibeans, the result would have been the same since (a) the trademark might not have shown up on a standard search and certainly not a US database search (b) this is not likely one of Frank's top-tier domains to warrant due diligence and (c) it may not be feasible for Domain Administration to engage in due diligence because of the volume of domains it owns. But for many domainers, trademark due diligence makes perfect sense so they can make a business decision as to how to use the domain (ie to develop as oppose to park). We have domainer clients who make an effort to figure out where the trademark problems might be and develop business strategies around those risks.

 

[Theo]

LawyerFights.com is available.

 

[jberryhill]

No John, my assertion is that there is a way to avoid being willfully blind. You seem to think that since there is no perfect way to immunize a domain from challenge, that no domainer should take any measures to do any due diligence.

No. But when you and Toto make it to Oz, get that strawman a brain.

I don't know where this non-payment red herring came from

It came from comments posted above in the thread.

 

[dvdrip]

Here is a case with a domain that expired, caught by Respondent, sold to Complainant, expired again, caught by Respondent again, Complainant filed Complaint, Complaint denied.

http://www.wipo.int/amc/en/domains/decisions/html/2007/d2007-1425.html