The Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d), is the federal law that gives trademark owners a civil claim against persons who act with a "bad faith intent to profit" from registering domain names that are identical or confusingly similar to protected marks. Remedies available to a prevailing trademark owner include an award of statutory damages of up to $100,000 per domain name, plus costs and attorneys' fees in some cases. Losing an ACPA case can ruin your day.
Congress softened the harshness of the ACPA by including a safe harbor for domain registrants who "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful," 15 U.S.C. 1125(d)(1(B)(ii). To date, courts have been very stingy with this defense. In Audi AG v. D'Amato, 469 F.3d 534 (6th Cir. 2006), the Sixth Circuit remarked that the safe harbor defense is available "only in the most unusual cases." In Virtual Works Inc. v. Volkswagen of Am. Inc., 238 F.3d 264 (4th Cir. 2001), the Fourth Circuit held that a domain registrant who acts even partially in bad faith is not entitled to the safe harbor. The intent of these cases is clear: cybersquatters won't be allowed to escape liability merely by professing a pure heart or mustering a decent argument that their use of the plaintiff's mark was fair or lawful.
The Ninth Circuit's decision yesterday in Lahoti v. Vericheck Inc., No. 08-35001 (9th Cir., Nov. 16, 2009), is in the same vein as Audi AG and Virtual Works. In Lahoti, the court said that the domain registrant was not entitled to claim the safe harbor defense because it was "unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case."
Wholly lawful. To my ear, "wholly lawful" is much more demanding than the language that Congress wrote, which is "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful." But three federal appellate panels clearly feel otherwise. "Wholly lawful" is a tough standard for anyone to meet, and it proved insurmountable for a garden-variety cybersquatter like Lahoti. The bill of particulars against him:
- Lahoti registered <vericheck.com>, a domain identical to the plaintiff's "Vericheck" Georgia state service mark.
- Lahoti published a collection of outbound links (some pointing to the plaintiff's competitors), not a legitimate offering of goods and services, at the <vericheck.com> domain name.
- Lahoti offered to sell the domain name to the plaintiff for $72,500.
- Lahoti had been adjudicated a cybersquatter in other judicial proceedings.
In most courts' estimation, the above factors are tell-tale signs of a dark, bad faith, cybersquatter heart. In fact, these factors would form the core of any decent "what not to do" list for domainers.
Now, as it turns out, the lower court made a couple legal errors when it ruled that the VeriCheck mark was a "distinctive" mark (and thereby protectable under the ACPA). The appellate court discussed at length how an arguably generic or descriptive mark might become "distinctive," and it sent the case back to the lower court for reconsideration.
So this was a close case as far as whether or not the plaintiff's mark is distinctive enough to support an ACPA claim. However, in this court's estimation, it wasn't a close case as far as whether Lahoti's behavior met the "wholly lawful" standard:
As we see the record, there is no genuine appellate issue on Lahoti’s bad faith. He has made his cybersquatter bed and now cannot persuasively challenge the district court’s conclusion that he must lie in it. A different case might be presented if Lahoti had a genuine business marketing service for which the Vericheck name was an aid, but there was no credible evidence of that here, nothing but his self-serving affidavit.
A reasonable person in Lahoti’s position—that is, a reasonable person who had previously been declared a cybersquatter in a judicial proceeding—should have known that his actions might be unlawful. Lahoti has previously advanced, unsuccessfully, the same trademark defenses he argues here, including the claim that the mark at issue was only descriptive and that he is entitled to the safe harbor. Lahoti’s failed defenses in these other cases make it unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case.
The message I take from this language is that if you have been adjudicated a cybersquatter in a prior proceeding, or you are in the "domaining" or domain name speculation business, you had better knock down the trademark owner's claim to a protectable interest in the mark because you will never convince a court that your registration of the domain was "wholly lawful." Close doesn't count in cybersquatting.
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