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Domain policy aims to keep fights out of court

A new policy in the works to settle fights over Net names quickly through arbitration is meant to curb cybersquatting, but it stands to affect domain registrants worldwide.

A new policy in the works to settle fights over Net names quickly through arbitration could have saved Dave Lahoti, the owner of "estamps.com," a lot of time and money.

Lahoti says he has spent several months and tens of thousands of dollars in his fight to hold onto the name after being challenged by E-Stamp Corporation, the online postage company that filed for an $85 million public offering in August.

"In June the court ruled that until the trial was over I could keep my site up, but that I couldn't offer any similar services to E-Stamp, or use the term 'e-stamps' on my site," said Lahoti, whose site was live for only ten days in February. "I certainly think there would be a value in going through the mediation route instead, because at least I could have the page up during [the dispute] and save a lot of the money that has been spent."

Lahoti, like many others who have stakes in Net names, is closely watching the development of a universal policy to settle domain name disputes through a neutral arbitration panel, which would cost less than $1,000.

The details of the policy were released last week; they lay out rights for those who have built brands around their ".com" names and set up new dispute mechanisms for those combating so-called cybersquatters. Cybersquatters register scores of domain names in hopes of reselling to them to the highest bidder or well-known companies.

The Internet Corporation for Assigned Names and Numbers (ICANN), which is charged by the White House with managing the Net's address system, will accept public comment on the proposed policy until October 13. Then the more than 70 domain name registrars accredited by the ICANN plan, including Network Solutions and America Online, will implement the policy and provide registrants with a list of arbitration services.

Scraps over domain names have been an ongoing problem, as individuals and businesses have pushed for the name they want to set up shop on the Web or otherwise express themselves.

Using a uniform dispute policy backed by the registrars and adopted by ICANN in August, a working group made up of U.S. lawyers, academics, and intellectual property experts drafted the new rules.

Handling disputes
The policy aims to combat cybersquatters. But once implemented, the rules also will apply to all domain name disputes, setting up an arbitration system that will be less expensive and faster than court battles.

An arbitration process could be kick-started if a complainant claims that a domain name causes consumer confusion; is registered in "bad faith," such as for the sole purpose of being resold at an inflated price; or if the initial registrant's interest in the domain name is "not legitimate."

For their part, trademark owners such as E-Stamp are staunchly defending their online names, the primary gateways to their sales on the Net. In its latest filing with the Securities and Exchange Commission, E-Stamp disclosed the lawsuit it filed against Lahoti.

"On June 14, 1999, the U.S. District Court granted a preliminary injunction requiring Mr. Lahoti to refrain from using his Web site in connection with Internet postage and to place a disclaimer identifying that his Web site is not associated with E-Stamp Corporation," the company stated in the filing. "We are seeking damages and a permanent injunction in connection with this matter."

The uniform dispute resolution policy also could give smaller players like Lahoti equal footing against big firms when they have to defend their rights over a domain name. Lahoti, who has yet to resurrect his "estamps.com" site, intended to launch a similar business to E-Stamp. He maintains another site about the dispute.

Before handing a name over to a trademark holder, the arbitration panel would have to consider several conditions, including whether a name is being used for noncommercial purposes and whether the domain name holder has tried to resell the name to the trademark holder. The policy also gives new weight to those who have built specific brands around their domain name.

The policy calls for consideration of "whether the domain name is commonly known by the domain name, even if the holder has acquired no trademark or service mark rights." But the proposal also sets up new geographic considerations that could favor U.S. residents.

Geographically challenged?
From the time the policy is in place, those who register domain names or renew accounts will have to agree to submit to an initial arbitration process instead of going to court in the event of a domain name fight.

Either party can still go to court if it is unhappy with a panel's decision--but the complaint would have to be filed within ten days in a court that resides in the same district as the registrar that sold the name. If the ten-day deadline goes by without a complaint being filed, the name will be given to whoever won in arbitration.

This could lead to an unfair advantage for domain name registrants who live in a different state--or country, for that matter--because they'd have to take action where the registrar is located, warned Michael Froomkin, of the University of Miami School of Law, who worked on the policy but said compromises were made.

"The potential losers are non-U.S. residents--most of the registrars are here now," Froomkin said. "All new registrants will have to agree to be sued where the registrar is and waive the right to do otherwise. So if you live in Poland and register with NSI, you agree that you can be sued in Virginia."

However, Froomkin went on to say that the arbitration process is primarily meant to combat abusive domain name registrants--cybersquatters--and that complicated disputes still belong in court.

"People who challenge a domain name registration with the exact same character strings as their trademark can now get one of these hearings--they are much better off," he added.