Reverse Domain Name Hijacking: An Emerging Negligence Standard?

Posted on December 7, 2009 by Steve Baird

A recent domain name decision under ICANN's Uniform Domain-Name Dispute-Resolution Policy (UDRP Policy), captioned Bin Shabib & Associates (BSA) LLP v. Hebei IT Shanghai ltd c/o Domain Administrator, found reverse domain name hijacking, under some rather interesting, if not questionable circumstances. The Rules that govern the UDRP Policy define Reverse Domain Name HiJacking as "using the Policy in bad faith to attempt to deprive a registered domain-name holder of a domain name." 

What caught my eye was the three-member panel's use of the ill-fated "knew or should have known" phrase in finding the requisite "bad faith" for hijacking; a phrase well-known to those who follow the trademark fraud case law and appreciate that recently this same "should have known" standard was flatly rejected by the Court of Appeals for the Federal Circuit (CAFC) in In re Bose, as being nothing more than a test for simple negligence. For more on the In re Bose decision, see here and here.

The Bin Shabib & Associates three-member panel, assigned by NAF, was unpersuaded that complainant had proven common law trademark rights in the acronym BSA (under the first UDRP element), so it declined -- as unnecessary -- to make any findings on the second and third elements under the UDRP, namely, the "lack of legitimate interest" and "bad faith" elements. Despite making no findings on either of these two key elements, the panel held as follows:

Also, the Panel finds that Complainant knew or should have known that it was unable to prove that Respondent lacks rights or legitimate interests in the disputed domain name or that Respondent registered and is using the disputed domain name in bad faith. Based on the foregoing, the panel finds that reverse domain name hijacking has occurred. See NetDepositVerkaik v. Crownonlinemedia.com, D2001-1502 (WIPO Mar. 19, 2002) (“To establish reverse domain name hijacking, Respondent must show knowledge on the part of the complainant of the Respondent’s right or legitimate interest in the Domain Name and evidence of harassment or similar conduct by the Complainant in the fact of such knowledge.”); see also Labrada Bodybuilding Nutrition, Inc. v. Glisson, FA 250232 (Nat. Arb. Forum May 28, 2004) (finding that complainant engaged in reverse domain name hijacking where it used “the Policy as a tool to simply wrest the disputed domain name in spite of its knowledge that the Complainant was not entitled to that name and hence had no colorable claim under the Policy”) (emphasis added).

A couple of curious points are worth discussion. First, putting aside for a moment the dubious "should have known" standard of bad faith, how can complainant be guilty of "bad faith" -- sufficient for hijacking -- in failing to appreciate that it had no chance of proving the very two elements for which the panel made no findings? Second, neither of the quoted parentheticals go far enough to support the quoted  "should have known" standard; instead, both speak only of actual knowledge.

As it turns out, however, there is some prior WIPO panel support for the "should have known" standard in finding "bad faith" sufficient for reverse domain name hijacking. Nevertheless, in each of these decisions, the panels made findings on all three UDRP elements before finding "bad faith" and ruling in favor of a claim for reverse domain name hijacking, see here, here, and here.

So, what do you think? Is the "should have known" standard defensible in reverse domain name hijacking decisions? If not, what about gross negligence? How about reckless disregard? What is the appropriate level of culpability? Does it even matter, or is a hijacking finding "of little import" to most complainants?

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Fraud at Domain Name Auction House

Posted on November 6, 2009 by Dan Kelly

A bomb exploded in the domain name aftermarket world on Wednesday.  A well-known domain name auction house called SnapNames.com announced that one of its (now former) employees had been bidding as a shill in many online domain name auctions run by the company since 2005.  SnapNames has an FAQ page on the matter here. 

It is not difficult to decry the many abuses that have gone on in the domaining industry:  cybersquatting, typosquatting, domain name tasting, domain name kiting, pay-per-click fraud, and now shill bidding (to name a few).  As these abuses tend to make for the juciest news, it is not surprising that some (including trademark attorneys) accuse the whole domain name business (or "industry") of being dirty.  But law, being a generally slow, blunt instrument, has so far caught up with only the first two of the abuses listed above.  What is less widely reported is that, for all of its wild-westness, the DN business has policed itself (e.g. cybersquatting, domain tasting) without resort to government intervention.  This is as it should be. 

Even so, self-policing is also slow to catch up to opportunists, so caveat emptor is the rule of the day in domain name transactions, especially when bidding at an auction, especially an online auction.  I recommend reading any auction site's rules, terms and conditions carefully before engaging in a transaction.  Some of these sites will readily represent both buyer and seller, which is a situation well-known to lawyers and real estate agents as a "conflict of interest."  Caveat emptor, indeed. 

Domaining is a buy low, sell high business.  While it has warts, and while some debate whether the business of domain name reselling is at all "legitimate," I do not think that the answer, or even an answer, to any of its problems is that governments step in to regulate it.  One of the virtues of self-policing (and by this, I mean by such umbrella entities as ICANN) is that the rules and regulations developed tend to be transnational, obviating the need for an international potpourri of laws, regulations, and, ultimately, lawyers.  While it is against my self-interest to admit it, I think this is a good thing.
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True Lies, Trademark Fraud, and the Medinol Detour

Posted on September 28, 2009 by Steve Baird

Trademark types: As promised, here are some of my more detailed thoughts and perspectives (at least for the time being) on the most significant trademark case of the year: In re Bose.

Thanks to Thomson Reuters for asking me to share them with their readers. I look forward to some great dialogue on the likely implications resulting from this long-anticipated trademark fraud decision.

Marketing types: An adversary's ability to cancel your company's trademark registration for fraud just got much more difficult with this important Bose decision. Basically, fraud means fraud again.

Instead of your adversary only needing to prove that you should have known that a material statement made to the Trademark Office actually was false at the time you made it (as was the law applied by the U.S. Trademark Office for the last six years), now, simple negligence is no longer enough to establish trademark fraud, instead, an actual intent-to-deceive the Trademark Office must be proven.

Having said that, despite this revived more difficult-to-prove fraud standard, it is as important as ever to treat the statements or representations you make to the Trademark Office as seriously as ever, and with the utmost solemnity, making sure you truly understand what you are signing so you can actually affirm the truth of those statements and representations.

It probably goes without saying that the apparent simplicity of the electronic trademark forms can be quite deceiving. So, there are no stupid questions when it comes to your understanding before signing electronic form documents that are submitted to the Trademark Office.

UPDATE: ExecSense Webinar on the Bose Decision, now available for purchase. Just so you know, all royalties due to me are being donated to The Ronald McDonald House Charity.

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CAFC Redirects TTAB in Trademark Fraud Ruling Today: In re Bose Decided

Posted on August 31, 2009 by Steve Baird

Today is a really, really big day for trademark types.

As many of us have been saying for a couple of years now, trademark fraud (i.e., fraud on the U.S. Trademark Office) continues to be one of the hottest issues facing trademark owners and the attorneys who represent them. Perhaps after today, not so much, but who really knows, we'll see.

For those not already plugged into the issue of trademark fraud, most mark the 2003 decision of the Trademark Trial and Appeal Board (TTAB) in Medinol v. Neuro Vasx, as the starting point for a much lower, and easier to prove, standard of fraud.

After Medinol, if a trademark owner knew or "should have known" it made a material false statement to the Trademark Office, the entire resulting trademark registration was subject to cancellation at any time. Since then, and following the reasoning in Medinol, the TTAB issued numerous decisions granting opposition or cancellation of trademark applications and registrations on fraud grounds, causing trademark owners and their attorneys great concern with what many have called a strict liability standard, not one based upon an actual "intent to deceive" the U.S. Trademark Office. Most of these cases have fallen into the "overinclusive" goods and services category of fraud cases -- basically, cases having sworn statements that the applied-for mark is currently in use in connection with all of the listed goods and services, when in fact, something less than all the goods or services are actually in use with the mark.

For those interested on the development of the trademark fraud issue, here is a pdf of my slides for a talk I gave in January 2008, at LAIPLA's Washington in the West continuing education conference.

As some of you may recall, during several of my talks over the last two years, I have figuratively flashed a yellow light and cautioned that the CAFC -- the TTAB's primary reviewing court --  has not been heard on the subject of trademark fraud for quite some time, and it has not been clear to me that the CAFC actually would endorse the TTAB's easier to prove fraud standard in the Medinol line of cases. Today the CAFC weighed in on the subject.

Earlier today, the United States Court of Appeals for the Federal Circuit (CAFC) decided In re Bose, a long-anticipated decision on what it takes to establish fraud before the U.S. Trademark Office. In doing so, the CAFC flashed a red light, indicating the TTAB had read "too broadly" prior CAFC precedent that had mentioned the words "should have known," and it specifically reaffirmed "that a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO," and it further redirected the TTAB: "Unless the challenger can point to evidence to support an inference of deceptive intent, it has failed to satisfy the clear and convincing evidence standard required to establish a fraud claim."

So, after today, trademark fraud still exists, and it can be proven, provided it is "proven to the hilt," with "clear and convincing evidence," leaving "no room for speculation, inference or surmise," and so long as "any doubt must be resolved against the charging party." Basically, "deception must be willful to constitute fraud." [Here is a link to a pdf of the CAFC's Bose decision].

Hat tip to John Welch of the TTABlog for alerting his followers of the CAFC's decision published first thing in the morning today.

My more detailed perspectives about the CAFC's Bose decision will follow later.

Also, stay tuned, because we continue to await the CAFC's fraud decision that it is currently reviewing in Grand Canyon West Ranch, LLC v. Hualapai Tribe.

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