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The Relationship Between the Domain Dispute Policy and the Anticybersquatting Act

By Jay Hollander

Jay Hollander, Esq. is the principal of Hollander and Company LLC,, a New York City law firm concentrating its efforts in the protection and development of property interests relating to real property, intellectual property and commercial interests, as well as related litigation.

The content of this article is intended to provide general information relating to its subject matter. Providing it does not establish any attorney-client relationship and does not constitute legal advice. Personal advice in the context of a mutually agreed attorney-client relationship should be sought about your specific circumstances.

On the battlefield between trademark owners and alleged cybersquatters, one of the accepted rules of engagement in recent years has been that most domain name disputes would be resolved according to the Uniform Domain Name Dispute Resolution Policy (UDRP), an administrative policy created by the Internet Corporation for Assigned Names and Numbers (ICANN).

There is good reason for this rule of engagement. Compared to a courtroom battle, fighting for domain names in an administrative UDRP proceeding makes good economic and business sense. First, it is fast, with papers being submitted within weeks and decisions coming barely a few months later. Second, the only relief possible is a transfer or cancellation of the domain name. In other words, there is no fear of paying the other side's legal fees to keep a litigant up at night.

To be sure, if unsuccessful trademark owners wanted to go further and start a court case, either in conjunction with or after, a UDRP proceeding, they could, either under the Anticybersquatting Consumer Protection Act (ACPA) or under other trademark or unfair competition statutes and court precedents. Some have chosen this dual-track course, but most haven't.

There have been many questions and complaints about how to resolve domain name disputes ever since the Internet went corporate in the mid 1990s. All the pertinent recent laws, such as the ACPA, the Federal Trademark Dilution Act (FTDA), and the UDRP itself, were written with the main goal of protecting trademarks. Some people expressed worries that the balance had tilted too far in the direction of corporate trademark holders and, even though the UDRP rules specifically allow either party to take a dispute to court, it wasn't altogether certain how a person who does not own a trademark might seek relief in the courts if he lost his domain name under the UDRP procedure and thought it an unjust ruling.

But a recent case coming out of the U.S. Court of Appeals for the First Circuit has made attempts by trademark owners to recover domain names a potentially more expensive and longer battle than they may have assumed. The case shows how a domain name registrant that loses a UDRP case can potentially still recover the domain name in federal court.

The case is Sallen v. Corinthians Licenciamentos LTDA, and it involves a dispute between a Brazilian soccer team known as the Corinthians and a man who owned the domain name "" and used it to post scriptures from the Bible book of Corinthians,. The court raised "important issues about the relationship between" the ACPA and the UDRP. Specifically, the court ruled that the ACPA grants to domain name registrants who have lost domain names under the UDRP an affirmative cause of action in federal court for a declaration of non-violation of the ACPA and for the return of a wrongfully transferred domain name.

The court's decision surprised some because in the Sallen case, the domain name registrant, had contractually agreed to arbitrate any dispute under the UDRP when it registered the domain name with an ICANN-accredited registrar, and an administrative panel already had concluded that the domain name registrant had failed the same basic cybersquatting tests set down under the ACPA.

The New Wrinkle in the Court's Ruling

A party always has been free to initiate litigation over rights to a domain name by filing a claim in a competent court instead of initiating a UDRP administrative procedure. He also was allowed to seek a "de novo," or new, review of a dispute in the courts, according to UDRP rules, but very few losers under the UDRP did so. In the Sallen case, the new wrinkle is that the loser of the UDRP ruling sought injunctive relief under the ACPA, a law particularly designed to protect trademark holders, not alleged cybersquatters.

Did Sallen, after being found a cybersquatter under the UDRP, have the right to seemingly turn the ACPA on its head by using it against a trademark owner to recover a domain name he lost?

The lower court said "no," agreeing with the trademark owner that, because the owner had represented to the court that it had no intention of further suing Sallen after winning the UDRP proceeding, there was no longer a required "case and controversy" actually before the court to adjudicate.

In other words, because Sallen had lost before the administrative panel and because the trademark owner had no plans to sue for other relief in federal court, that court had no further power or "jurisdiction" over the matter.

But the Court of Appeals disagreed, saying that there was still a real dispute if each party claimed the right to the same domain name and Sallen claimed that the UDRP determination was wrong.

Using that simple logic, the First Circuit has ruled that a court finding in favor of a domain name registrant under the ACPA trumps previous contrary determinations by a UDRP panel, and, in so ruling, has opened the door to federal court review of UDRP rulings, by making it clear exactly how a loser under the UDRP can go forward with a claim in federal court under the ACPA.

What the Appeals Court Decision Means to You

It is important to note that the First Circuit's decision does not mean Sallen has won the domain name; he still has to persuade the court that he has the right to it. What he won is simply the right to be heard. But this fact alone has important implications to domain name registrants and trademark owners alike.

If you are a respondent in a losing UDRP action, it means all is not lost, or as they say, "It ain't over 'til it's over." If you are simply convinced that an injustice has occurred, you can do what Sallen did. But be aware that you must move fast and file your case in court within just 10 business days of losing a UDRP ruling.

More importantly, there is also a financial risk in this strategy. Unlike the UDRP remedies, which are limited to transfer or cancellation of the domain name, a registrant found to be a cybersquatter under the ACPA is liable for damages to the trademark owner equal to either statutory damages up to $100,000 per domain name, or actual damages and profits, as well as court costs and attorneys' fees, at their election and at the court's discretion.

On the other hand, if you're a trademark holder who has won a domain name under the UDRP, you might want to hold off on that victory party for a few days. While it has been rare in the past for losing respondents to seek review in the courts, the court's decision in Sallen logically can be expected to encourage others to try this mode of attack. And that means that, before you make a move, you, along with your attorney, need to analyze your particular fact pattern and decide whether the UDRP is the best procedure, or the only procedure, you wish to consider and to take steps in advance of any UDRP filing to be prepared for an ACPA review immediately following the ruling, whether you win or lose.

Although it's too soon to tell for certain, the appellate decision in the Sallen case may be the first sign of the transformation of the UDRP from an inexpensive method of actually resolving the bulk of domain name disputes into nothing more than an inexpensive lower court determination, to be followed by a lengthy and expensive appeal.

Copyright © Jay Hollander, 2007. All Rights Reserved.

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