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House, courts make decisions on cybersquatting

The House passes a bill to crack down on illicit domain name registrations, close behind a federal appeals court decision that could make it easier for cybersquatters to stay in business.

Trademark holders got some good news and bad news this week.

The House today passed a bill to crack down on illicit domain name registrations, but a federal appeals court yesterday handed down a decision that could make it easier for cybersquatters and small businesses which register trademarked names to stay in business.

The Trademark Cyberpiracy Prevention Act would hold those who use trademarks or service marks on the Internet in "bad faith" liable in a civil action. The bill passed the House on a voice vote with no opposition, and must now be reconciled with companion legislation passed by the Senate in August.

Separately, the Ninth Circuit U.S. Court of Appeals in San Francisco yesterday found that registrars which set up Internet addresses cannot be held liable when they inadvertently assign a trademark to someone who is not the registered holder of the mark. Lockheed Martin vs. Network Solutions is a blow to trademark holders whose marks have been usurped by cybersquatters--profiteers who allegedly acquire coveted domain names for the sole purpose of ransoming them to their rightful owners.

The bill's passage thus comes as the courts appear to be creating a growing body of jurisprudence that has weakened the rights of trademark holders on the Net.

"This is a really significant bill because it proves that Congress can pass legislation protecting the legitimacy of the Internet while also protecting the freedom the Internet represents," said Jeffrey Solsby, press secretary for Rep. James Rogan (R-California), who authored the bill.

But some civil liberties groups oppose the measure, saying it creates new rights for trademark holders specifically relating to domain names that could threaten free speech.

"I'd call it the Business Criticism Prevention Act," said Stanton McCandlish, a spokesman for the Electronic Frontier Foundation (EFF), which works to protect people's online rights.

"Trademarks are meant to give some limited rights to protect a business, but there have traditionally been some pretty clear exemptions--for example, for fair use. People are trying to change that," he said.

Legal trend
In San Francisco, a panel of three judges upheld a lower-court decision dismissing a case brought by Lockheed Martin against Network Solutions (NSI) over addresses that were registered using variations of the protected "Skunk Works" mark. Lockheed filed suit in 1996, charging that NSI had refused to help shut down an alleged infringer after being notified of an apparent violation.

If the decision holds, Internet registrars such as NSI will have no incentive to police potential trademark abuse by domain name registrants, making it more difficult for companies to crack down on misuse of their marks.

Yesterday's decision is at least the third this year from the Ninth Circuit to address the intersection of trademarks and the Internet. The seven-page ruling cited the court's earlier decision in Avery Dennison vs. Sumpton for a more thorough discussion of its emerging take on the issue.

In that case, the Ninth Circuit ruled that a small business's ownership of the names "" and "" did not infringe trademarks held by Avery Dennison, a large office supply company.

A three-judge appeals panel ruled in August that Avery had no right to take control of the domain names because the company's trademarks did not meet the requirements of the Federal Trademark Dilution Act, under which the suit was brought. The 1995 statute protects "famous," or "strong," marks--such as Disney or Toyota--from being diluted through unauthorized use.

Caught between Congress and the courts is the nonprofit body that for now is primarily responsible for administering the Net. Under a plan put forward by the Internet Corporation for Assigned Names and Numbers (ICANN), disputes over domain names would be handled through mandatory arbitration--a process that could benefit small-business defendants who do not have the financial resources to battle major corporations in court.

"This bill totally undermines the work of ICANN," said the EFF's McCandlish. "The process hasn't been perfect, but some consensus has been starting to emerge concerning the rights of trademark holders internationally...People have been working on this for two years, and now Congress is jumping in with this bill."

Solsby defended the bill, however, saying it had broad support from an array of industry groups. He said the legislation strikes a balance by extending existing trademark law to the Net.

"It is meant to protect a legitimate trademark from uses that a court would deem are an intent to defraud," Solsby said. "Determining whether fraud occurred would be left up to the courts."

Asked whether he sees a tension between the directions in which Congress and the courts are going on trademarks, Solsby demurred.

"Through [the Trademark Cyberpiracy Prevention Act], the House is trying to extend trademark law to domain names," he said. "The courts are only as effective as the legislation before them allows."