Domain squatters losing out

Cybersquatters are falling on tough times.

Thanks to a trademark law passed in 1995 targeting Internet squatters, federal judges in two recent cases have sided against individuals and companies that buy up domain names and then try to resell or otherwise profit from them.

In potentially precedent-setting cases, the judges ruled that the domain name system's "first come, first served" policy does not apply when the domain name in question dilutes another company's trademark.

Trademark law has long been concerned with avoiding confusion in the marketplace. For example, a company selling nails under one name could argue that another selling screws under the same moniker would confuse consumers.

CNET Radio talks to FreeView's Jerry Sumpton

But a second type of trademark law only recently has been enacted on the federal level. That law concerns the "dilution" of a trademark: In a fairly common scenario involving Internet domain names, a company with a well-known, or "famous," name can sue if someone puts up a pornographic Web site using their name.

The issue isn't that the consumer genuinely is confused between the products offered by the pornographic Web site and the nail manufacturer but that the nail manufacturer's trademark has been diminished, or diluted, by its association with pornography.

"The dilution statute of 1995 was specifically targeted toward giving remedies against domain name squatters," said Internet attorney and Santa Clara University Law School professor Eric Goldman. "The Dilution Act was meant to curb the 'gold rush' of people going in and registering domains of company trademarks with the intent of selling them back to companies."

But in its zeal to prevent cybersquatting, Congress may have gone too far, according to Goldman. "The Dilution Act has also given strong remedies for people who would not have had a normal trademark infringement claim previously," he said. "And they are therefore getting extra leverage under the new law."

In an instance of the type that the law was drafted to address, the 9th Circuit Court of Appeals upheld a decision holding that in buying up domain names and attempting to sell them to companies that owned similar trademarks, cybersquatter Dennis Toeppen essentially was trying to extort money from those firms.

A separate decision that came down last month, according to Goldman, may be evidence that the 1995 law has tipped the scales too far on the side of the trademark owners. In that ruling, U.S. District Judge J. Spencer Letts decided that a small Canadian company called FreeView Listings did not have the right to register the domains avery.net and dennison.net.

The company's use of those domains, according to the decision, infringed on the trademarks belonging to office supplies vendor Avery Dennison.

FreeView makes its money by buying up domains of common surnames, mostly under the ".net" top level domain, and renting the use of them to people who want email and Web page addresses with those names. For example, FreeView owns the domain smith.net, and will rent it out to anyone who wants an email address, such as "zoe@smith.net," or a Web page such as "www.zoe.smith.net." The company could also rent the same domain to others who want to use the name Smith with different given names.

Avery Dennison attorney David Quinto hailed the ruling as a victory for both trademark holders and consumers and called it precedent setting.

"When people go online to find information about a company or its products, they look under the name or the brand," said Quinto, of the Los Angeles practice Quinn Emanuel Urquhart Oliver and Hedges. "To say that others cannot register brand names and license them out to others as Web sites or anonymously as email boxes is an important protection for consumers and corporations alike."

FreeView argued that because the names in question, like most of its inventory of 12,000 names, were common surnames, the company's trademark should not trump their right to rent the names out to individuals.

"What the judge has done here is turn trademark law on its head," said FreeView attorney Eric Bakri Boustani with Monterey, California, law firm Davis & Schroeder.

"A trademark historically is not a monopoly, which is why you can have United Airlines, United Van Lines, and United Cleaners down the street from my house. As long as the name falls in one of 42 separate classes, there isn't any confusion for the consumer. Nobody is going to confuse Lexis-Nexis research services with the Lexus automobile."

Boustani also argued that the decision would endanger a controversial proposal to add seven new top level domain names to the current most top level domains that include ".com," ".net," and ".org."

"What good is it if there are additional top level domains if any company can come in and swipe them up?" Boustani asked. "It's a frightening concept if you have a big enough corporation you can just take all instances of your trademark off the Internet, particularly if there are literally tens of thousands, if not hundreds of thousands of people with that name. It turns the Internet from a cooperative thing to a business tool for large corporations."

Goldman agreed that the courts' current interpretation of the 1995 dilution statute could make the expansion of top level domains an exercise in futility.

"You won't see a meaningful increase in actual name space because of the Dilution Act," he predicted.

FreeView last week filed with the 9th Circuit to appeal the District Court decision.