AAA loses UDRP action to obtain AAA.net

DomainNameWire reports on the UDRP divided panel decision denying the request by the American Automobile Association, Inc. (“AAA”) to obtain the domain name www.aaa.net. (HT: DefendMyDomain.com). See The American Automobile Association, Inc. v. QTK Internet c/o James M. van Johns, FA0905001261364 (Nat. Arb. Forum July 25, 2008).

The decision is an interesting one in that it goes against the position of many trademark owners seeking to obtain a domain name under the UDRP that a pay-per-click advertising site cannot give rise to a legitimate claim to a domain name. The panel made clear that it was rejecting the argument that pay-per-click advertising is per se illegitimate and that whether the advertising is a bona fide offering of goods or services instead turns on whether the domain name owner is exploiting the trademark owner’s trademark by offering advertisements that confuse Internet users for commercial gain.

And in this case, the panel concluded that the domain name owner’s pay-per-click advertising was a bona fide offering of goods or services under the UDRP rather than an illegitimate exploitation of consumer confusion. The panel noted that the desirability of this particular three letter domain name (AAA is a top rating for a bond, a battery, a shoe size, and an acronym associated with many different organizations). The domain name is also a short, three-letter string. Kis v. Anything.com Ltd., D2000-0770 (WIPO Nov. 20, 2000) (recognizing the value of a three-letter domain name). Thus, the domain name owner may have registered for any of a number of reasons that have nothing to do with AAA’s business

Also important to this panel’s decision was that the pay-per-click advertisements were generally not related to any goods or services associated with AAA’s mark:

While [AAA] has found among the sea of auto-generated advertisements some related to its business, these appear to be few, and do not seem likely to create or exploit consumer confusion, and on this record could plausibly have been inadvertent. . . . Because such advertisements are auto-generated and rare, they do not appear to be targeted at [AAA’s] mark. The lack of targeted advertisements combined with the fact that is a desirable domain name for reasons unrelated to Complainant’s business suggest that Respondent’s pay-per-click advertising is a bona fide offering of goods or services.

And so the panel, by a vote of 2-1, refused to order the transfer of the domain name to AAA.

So does this decision represent a turn in the thinking of UDRP panelists regarding the business model of pay-per-click advertising? Based on the separate dissent filed by the lone dissenting panelist -- who made his disdain for the pay-per-click advertising business model quite clear -- there might still be some UDRP panelists that need some convincing:

Respondent’s business model is to take generic words and/or letter combinations and to register them as domain names. Once someone wants to acquire the domain name, Respondent will sell it (presumably at a profit, otherwise Respondent could not stay in business). This Panel believes such practices were intended to be prohibited by the policy, even though this case is a close call.

ICANN’s Proposed Uniform Rapid Suspension Program For Fighting Cybersquatters

ICANN's Implementation Recommendation Team (“IRT”) issued a report on May 29, 2009, which recommends the implementation of a new type of domain name proceeding that trademark owners could pursue in order to go after cybersquatters cheaper and faster. The proceeding is tentatively called the Uniform Rapid Suspension System (“URS”) and the IRT is recommending that it be mandatory for all new generic Top Level Domains (gTLDs).

The purpose of the URS is to provide a cost effective and timely mechanism for brand owners to protect their trademarks and to promote consumer protection on the Internet. The URS is not meant to address questionable cases of alleged infringement (e.g., use of terms in their generic sense) or for anti-competitive purposes or denial of free speech, but rather for those cases in which there is no genuine contestable issue as to the infringement and abuse that is taking place.

For a fee of $200 (for up to 25 domain names), trademark owners submit a complaint (the form of which is attached as Appendix B to the report) and notice will be sent to the domain name registry so that it can freeze the domain name to prevent transfers or other changes to the registration (but the website remains up). After the freeze, notice is given to the registrant to file an answer to the complaint (the form of which is attached as Appendix D to the report) within 14 days. The complaint and answer are then reviewed by an examiner who looks at the same three basis issues examined under the UDRP (domain name identical or confusingly similar to a valid mark, registrant’s rights or legitimate interests in the domain name, and bad faith), but under a “clear and convincing” standard of proof rather than preponderance of the evidence of the UDRP

The URS would only allow a complaining party to “freeze” a domain name for the remainder of the registration term – resolving to a specific error page. The System would not result in the cancellation of the domain name or the transfer of the domain name to the complainant.

Supposedly, if there is any genuine contestable issue as to whether a domain name registration and use is an abusive use of a trademark, the complaint will be denied terminating the URS process without prejudice to further action (i.e., a UDRP or actual lawsuit). “The URS is not intended for use in any questionable proceedings, but only clear cases of trademark abuse.” Moreover, any trademark owners found to repeatedly misuse the URS are supposed to be removed from the system and denied access to the URS for a set period of time.

Finally, both sides would have rights to appeal the decision. If the complaint is denied, the complainant may initiate a proceeding de novo under the UDRP or in a court of appropriate jurisdiction. If the complaint is granted, the Registrant may request reconsideration on the original record by a “URS ombudsman” on the grounds that the decision was “arbitrary and capricious or an abuse of discretion” or may initiate a de novo proceeding in a court of appropriate jurisdiction.

The Report gives the following illustration of how the URS in practice:

For example, if the trademark in question is BRANDXYZ for use in connection with computers and the domain name in question is brandxyzz.[gtld] and is used in connection with an abusive pay-per-click site, the site would be frozen. If the domain name is brandxyzcomputers.[gtld] and the record shows that it is a bona fide retailer who legitimately sells BRANDXYZ computers, the URS complaint would be denied.

[Comment—does stating “used in connection with an abusive pay-per-click site” imply an acknowledgment that that there can be such things as “nonabusive” pay-per-click sites” or is it more likely that all pay-per-click sites are deemed abusive by the ICAAN's IRT?]

For those not interested in reading the IRT report, TheDomains.com has a succinct yet detailed (and somewhat critical--but fairly so in my opinion) review of the proposed URS System.

Sarasota Realtor’s MLS Domain Name Transferred by Network Solutions Despite Filing of Lawsuit

I previously blogged (here) about the lawsuit filed by Sarasota Realtor Marc Rasmussen in an effort to keep his domain name http://www.thesarasotamls.com/ following a split decision by an arbitration panel which ordered his domain name to be transferred to the Sarasota Association of Realtors (“SAR”).

Unfortunately, due to some carefully crafted language in ICAAN’s Uniform Domain Name Dispute Resolution Policy (“UDRP”), the lawsuit was unable to stop the transfer of the domain.

The Herald Tribune ran an article yesterday (link here) about the lawsuit which noted that as of Tuesday, October 21, 2008, the domain name had been transferred to SAR by domain registrar Network Solutions (based in Virginia) despite Rasmussen’s filing of his lawsuit in the U.S. District Court in for the Eastern District of Virginia. See Rasmussen v. Sarasota Association of Realtors, Inc., Case No. 08-cv-00954 (E.D. Va. September 15, 2008).

Apparently, on October 17, Network Solutions notified the parties by e-mail that the domain name would remain locked pending the outcome of the litigation. The same e-mail also noted that the proper jurisdiction for the lawsuit under the UDRP was either Sarasota (Rasmussen’s domicile) or Virginia (Network Solution’s domicile).

SAR countered by arguing that Rasmussen’s lawsuit had been filed in the wrong jurisdiction, and thus could not stop the transfer of the domain name. Multiple e-mails were exchanged back and forth among the parties, the UDRP arbitrators, and Network Solutions. Lawyers for the National Arbitration Forum (the arbitrator of the UDRP action between Rasmussen and SAR) told Network Solutions that its position on jurisdiction was incorrect because while there are indeed two proper jurisdictions for a lawsuit to block the transfer, the choice of jurisdiction is actually up to the complaining party, in this case, SAR. Thus, because SAR had chosen Sarasota for its jurisdiction, that was the only proper place for a complaint to be filed to stop the domain name transfer. By Tuesday, Network Solutions had turned control over the domain over to SAR, which immediately began redirecting web traffic to its own website.

In order to understand what happened, one must understand certain parts of ICAAN’s Uniform Domain Name Dispute Resolution Policy (“UDRP”) as well as ICAAN’s UDRP Rules (“Rules”).

Paragraph 4(k) of the UDRP describes the circumstances under which the domain registrar agrees to enforce a decision by a UDRP arbitration panel:

If an Administrative Panel decides that your domain name registration should be canceled or transferred, we will wait ten (10) business days (as observed in the location of our principal office) after we are informed by the applicable Provider of the Administrative Panel's decision before implementing that decision. We will then implement the decision unless we have received from you during that ten (10) business day period official documentation (such as a copy of a complaint, file-stamped by the clerk of the court) that you have commenced a lawsuit against the complainant in a jurisdiction to which the complainant has submitted under Paragraph 3(b)(xiii) of the Rules of Procedure.

Paragraph 3(b)(xiii) of the Rules, which describes the jurisdictional statement that all UDRP complainants must have in their UDRP complaints, reads “State that Complainant will submit, with respect to any challenges to a decision in the administrative proceeding canceling or transferring the domain name, to the jurisdiction of the courts in at least one specified Mutual Jurisdiction”. Paragraph 1 of the Rules defines “Mutual Jurisdiction” as “a court jurisdiction at the location of either (a) the principal office of the Registrar (provided the domain-name holder has submitted in its Registration Agreement to that jurisdiction for court adjudication of disputes concerning or arising from the use of the domain name) or (b) the domain-name holder's address as shown for the registration of the domain name in Registrar's Whois database at the time the complaint is submitted to the Provider.”

Thus, at the time SAR filed its UDRP action against Rasmussen, SAR’s complaint had to elect to submit to the jurisdiction of the court in at least one of the available jurisdictions (in this case, either Network Solution’s Virginia domicile or Rasmussen’s Sarasota domicile).

However, because Rule 3(b)(xiii) only requires a complainant to submit to “at least one” of the jurisdictions, SAR likely elected in its complaint to submit itself only to the jurisdiction of Sarasota (and not even mentioning Virginia). Thus, when it came time for Network Solutions to enforce Paragraph 4(k) of the UDRP, that provision explicitly required that the lawsuit against the complainant be filed in a jurisdiction to which the complainant submitted in its complaint. Since Rasmussen’s complaint was filed in Virginia and SAR had submitted to Sarasota, the lawsuit was insufficient to prevent Network Solutions from transferring the domain name.

Rasmussen has said he will continue the fight to get his domain name back. He has his own blog post on his current web site (link here) regarding the ongoing development in the case.

Sarasota REALTOR Files Federal Lawsuit To Keep MLS Domain Name

Inman New ran an article yesterday (link here) about a Sarasota real estate agent who filed a federal lawsuit in the U.S. District Court in for the Eastern District of Virginia in September in order to keep his domain name www.thesarasotamls.com. See Rasmussen v. Sarasota Association of Realtors, Inc., Case No. 08-cv-00954 (E.D. Va. September 15, 2008).

In August 2003, Marc Rasmussen, a REALTOR® and member of Sarasota Association of Realtors (“SAR”), registered the domain name http://www.thesarasotamls.com/ to promote his real estate services. In June, SAR filed a UDRP action against Rasmussen arguing that SAR had acquired trademark rights to the Sarasota MLS mark and that his domain name was confusingly similar to such mark and was registered in bad faith. A split decision by the arbitration panel ordered the domain name to be transferred. Rasmussen’s lawsuit will provide a temporary reprieve against the panel’s domain name transfer order while the parties battle it out in federal court.

As most people (and certainly most real estate agents) know, MLS is the well-recognized abbreviation for Multiple Listing Service – the databases of real estate listings which are controlled by various regional associations affiliated with the National Association of Realtors (“NAR”). In this case, SAR owned the domain name SarasotaMLS.com. What people may not know is that the term MLS is not actually a registered trademark owned by NAR or any associated group (unlike the REALTOR® mark which NAR for years has worked to protect from genericide).

What complicates the issue for NAR members is that for many years, NAR did not have any policy regarding the use of the MLS mark in domain names. In fact, NAR’s own REALTOR magazine an article at one time (before Rasmussen registered his domain name) by “Mr. Internet” (Michael J. Russer) specifically advising agents to register domain names with the term “MLS” in them in order to drive internet traffic to their sites.

When NAR last November finally did approve a policy, it gave the local associations running the local MLSs the option to enact a policy banning their members from using the terms "MLS" and "Multiple Listing Service" from Web site URLs, company names, e-mail addresses and other marketing materials. NAR also provided some guidance for local associations to use in determining whether the use of terms such as "MLS" in a website operated by an NAR member might conflict with provisions in NAR’s Code of Ethics that all members are bound to comply with (e.g., where use of MLS for a domain name might lead a consumer to believe that the website is the local MLS). But such a determination of whether a member’s use of MLS in a domain name is an ethical violation is ultimately left in the hands of the local associations – and thus decisions about use of MLS in domain names can vary by regional area and even on a case by case basis. In addition, the impact is felt mostly by members of the local association – real estate agents who choose not to be affiliated with NAR and the local NAR chapter or its MLS are not bound by NAR’s Code of Ethics or any local policy.

In the case of Rasmussen, there was an ethics panel decision by SAR which apparently found the he had not committed an ethical violation by the domain name registration. Interestingly, when Rasmussen attempted to enter this ethics decision into evidence before the UDRP panel, SAR cited a provision in NAR’s rules governing the ethics proceeding which apparently prevent Rasmussen from disclosing the ethics decision and or using the decision in an arbitration case.

Part of Rasmussen’s argument is that SAR does not have any valid rights to the mark Sarasota MLS. The website http://www.sarasotamls.com/ redirectes to SAR’s site at http://www.sarasotarealtors.com/. And while the website contains a small link at the top which reads “Sarasota MLS,” a click on the link leads to the current MLS to which Realtors in the Florida counties of Sarasota and Manatee use – the Mid-Florida MLS. SAR’s counterargument is that the Sarasota MLS does still exist and provides information to the Mid-Florida MLS.

While Rasmussen’s domain name is currently being forwarded to another domain name while the case is pending, his website still contains the disclaimer in bold that was on his previous site:

This is not the Sarasota Multiple Listing Service (MLS). The Sarasota MLS no longer exists. Realtors in Sarasota and Manatee counties now use the Mid-Florida MLS system. This website contains virtually all of the properties for sale in Sarasota and Manatee counties. There is no need to search multiple websites since this site is updated daily with almost every property for sale.

What may have given Rasmussen enough encouragement to file the federal action were the comments by the dissenting panelist in the UDRP action. That panelist felt that SAR had not established common law trademark rights to the MLS mark prior to the registration of the domain because SAR tended to use the MLS mark in a descriptive sense to identify the MLS database and not in a trademark sense, and never sought to protect the term as a mark until real estate agents began using the term in domain names. The panelist also felt that Rasmussen did not have the requisite bad faith needed under the UDRP, specifically noting the aforementioned advice to its members to register include the term “MLS” in their domain names in order to drive traffic to their sites (even though NAR later changing its policies about that). Finally, NAR’s own ethics decision declining to censure Rasmussen for this particular domain registration – even though the decision arguably should not have even been presented as evidence – nonetheless supported Rasmussen’s argument that he did not have any bad faith intention at the time he registered the domain name.

The future of cybersquatting litigation – battling click-through web directories and typosquatting

The Las Vegas Business Press ran an article today by Valerie Miller entitled “www.catchusifyoucan.com” (link here) on the current state and future trends of “cybersquatting” litigation.

The article notes that, as common domain names become less available, there are a growing number of companies registering domain names containing common misspellings of other well-known domains (so-called “typosquatting”). [See related blog post here].

More noteworthy, however, is what these domain owners are putting up on those pages. Gone are the days where such domain names would lead to an adult website or occasionally even a direct competitor. The trend these days (what the article describes as the next big thing in domain name disputes) is for such sites to host multiple “click-through” links from which such domains then derive revenue for every click.

Not just limited to typosquatting, many companies are in the business of registering domain names incorporating all or part of a well-known trademark (or common misspelling thereof) and then hosting these “web directories” in hopes that enough web visitors will click on the directory links provided that the revenue earned at least pays for the domain registration. The profit margins may be slim, but with the right volume, a very profitable business emerges.

As the article notes, one developing issue is whether hosting such “directories” constitutes commercial use for purposes of causes of action for cybersquatting, trademark infringement, or unfair competition. The article specifically mentions one lawsuit brought by 3700 Associates, LLC, the developer of The Cosmopolitan Resort & Casino, against Softech Ltd., a Cayman Islands company which owns the domain name “cosmopolitanlv.com.” See 3700 Associates, LLC v. Softech, Ltd., Case No. 07-CV-01600 (D. Nev. Nov. 30, 2007). [Click here for prior post on one of the first cybersquatting lawsuits filed by 3700 Associates in Nevada which was dismissed for lack of jurisdiction, but subsequently refiled in Florida]. In the case against Softech, some of the click-through links allegedly generated by visiting cosmopolitanlv.com lead to competing Las Vegas condominium projects or competing Las Vegas hotels such as Mandalay Bay – effectively using 3700 Associates’ trademarks to divert web surfers to competing businesses.

One nuance that the article does not explore is an important aspect of the current domain name registration system that has allowed this business model of hosting click-through links to thrive and prosper – Domain Name Tasting. The problem was noted recently by the World Intellectual Property Organization (WIPO) in its recent report entitled “DNS Developments Feed Growing Cybersquatting Concerns.” (HT: Marty Schwimmer). The report, which notes the unprecedented number of cybersquatting complaints filed in 2007 (2,156 complaints were filed with the WIPO’s mediation center -- an 18% increase over 2006 and a 48% increase over 2005), also highlights the growing concern that trademark owners have over the trend of Domain Name Tasting:

The practice of registering domain names during a five-day registration fee grace period for pay-per-click revenue remained a significant concern for rights owners in 2007. Frequently involving trademarks, the often automated practice of “tasting” effectively prevents rights holders from assembling reliable and timely information that would enable the filing of a UDRP complaint, leading them in some instances to resort to court litigation, especially in the USA.

While the concerns noted in the report are more focused on the ability of trademark owners to file UDRP complaints against alleged cybersquatters, the very fact that domain name registrars have a five day grace period on domain name registrations has enabled such companies to “taste” for free whether a website hosting click-through links will generate sufficient traffic and click-through revenue to pay for itself. Those sites not likely to be profitable are simply deleted and the registrar receives a credit. Fortunately, ICAAN recently announced its intent to take action with this year’s budget to end the five day grace period and begin charging registrars the annual ICAAN fee for each domain. But since the annual fee is still only 20 cents per domain, the issue of businesses registering multiple domains and hosting directories of click-through links will not go away.

One would hope that as more web surfers become more internet savvy, the proliferation of these directory sites would diminish. After all, these directory web sites only make money because people click on the links that are generated. If people, upon realizing that they are not on the site that they expected, would simply retype the domain name again or bring up a well-recognized search engine (like www.google.cm), then the domain name owners would eventually not be able to derive enough click-through revenue to make it profitable for them to keep such vast inventories of domain names.