Who's worried about the UDRP?
United States: Fifth Circuit Finds Cybersquatter Liable under Anti-Cybersquatting Act and Texas Anti-Dilution Law
20 May 2002
In an April 3, 2002 decision, the U.S. Court of Appeals for the Fifth Circuit issued its ruling in E. & J. Gallo Winery v. Spider Webs Ltd. and affirmed summary judgment in favor of Ernest & Julio Gallo Winery on its claims against defendant Texas-based Spider Webs Ltd. that it violated the federal Anticybersquatting Consumer Protection Act (ACPA) and Texas anti-dilution law. The court upheld the constitutionality of APCA and confirmed that so-called domain name "warehousers" and "traffickers" can be liable without a showing that they ever offered to sell the domain name to the trademark owner.
Spider Webs Ltd began registering domain names in June 1999, registering nearly 2000 domains including some related to companies and products such as "oreocookies.com" and "firestonetires.com." Although it did not contact the E. & J. Gallo Winery to solicit a payment in exchange for turning over the domain name, it was contacted by attorneys for the winery who demanded that Spider Webs either abandon the domain name or transfer it to the winery. Spider Webs refused and instead began posting materials to the domain under the heading "Whiney Winery," including materials disparaging of the winery.
The Fifth Circuit affirmed that Spider Webs had a "bad faith intent to profit" and therefore was liable under the ACPA. The court also found that Spider Webs' use of "ernestandjuliogallo. com" violated Texas' anti-dilution statute, which provides for an injunction if the defendant's actions are likely to injure a business reputation or to dilute a trademark, without a showing that there is competition between the parties or confusion as to the source of goods or services. The decision marks the first time the Fifth Circuit has applied the federal Anti-Cybersquatting Consumer Protection Act and also the first time the court has applied Texas' anti-dilution law to cybersquatting, said Craig Weinlein, attorney for the winery.
Why This Matters: This case demonstrates the potential for plaintiff reliance on state anti-dilution laws in the cybersquatting context, and also illustrates the inadvisability of defendants using the domain at issue to post Web pages disparaging the plaintiff trademark owner. Most importantly, this case illustrates how the laws on cybersquatting have matured and how ransoming domain names is no longer a viable business.
This article originally appeared in ADLAW By Request, a publication of Hall Dickler Kent Goldstein & Wood LLP