Dealing with Cybersquatters

August 1, 2013

The vast majority of companies conduct at least some of their business over the internet. Domain names are an essential part of a business brand and effectively “a showcase for business”.

As a key aspect of a business’ brand, domain names can have significant value. A good address is highly sought after and can be expensive to obtain – but where there is value, people will try to exploit it.

Cybersquatting is occupying a domain name that rightly belongs to someone else. A cybersquatter will usually offer to “transfer” it back to the legitimate owner for a price.

A classic example of cybersquatting was over the domain name for Harrods. More recently cybersquatters have attempted to register domain names connected with the Royal baby.

The growth of online trading has also seen in corresponding growth in cybersquatting. This should only increase with the upsurge in Chinese domain registrations and introduction of new gTLDs e.g. .pepsi or .bmw. (gTLDs are top level domain names such as .com or .org.)

Recently Nominet (the internet registration company for .uk domain names) has announced its 10,000,000th registration. If even a small fraction of these domains are subject to dispute, the potential for cybersquatting cases is significant.

Given its potential value, a brand should be protected the way a Company would protect its stock, fixtures and bricks and mortar – so when a business falls victim to cybersquatting, it needs to act and act quickly. It needs to be aware of all its options which may including the Civil Courts.

Cybersquatting will often happen in the following way. A Company becomes aware of another Company or individual which has registered a similar domain name. This has or will cause confusion and may direct business away from the Company. Often the cybersquatter contacts the Company to request an “administration fee” to have the domain name transferred.

The Company has several options. It has potentially an action in Court for passing off (goodwill, misrepresentation and damages) and for trade mark infringement if it has a registered brand. The Court could award an injunction in respect of the domain name and damages for any loss and damage to the Company’s business. However Court proceedings can be expensive and protracted.

A Court cannot compel someone to do something outside its jurisdiction. It may be difficult to identify the appropriate Defendant. A savvy cybersquatter may keep transferring domain names into different names in different jurisdictions to avoid judgment.

Aside from the Court process, there are two administrative processes to forcibly transfer domain names depending on whether the site in question is a top level domain name e.g. .com or a country code level domain name e.g. .UK.

For .uk domain names, application can be made under the Nominet procedure. UK Courts usually abide by Nominet decisions. For top level domains there is a universal dispute resolution policy (UDRP) which is adjudicated by the World Intellectual Property Organisation (WIPO).

These administrative procedures have several advantages. They are usually much quicker and cheaper than proceedings in national Courts. The focus is on the domain name rather than a Defendant which can either be deleted or forcefully transferred to avoid jurisdictional issues.

Unfortunately there are also inherent disadvantages with the administrative processes. Neither damages nor costs can be awarded by the Administrative bodies. The applicant is responsible for any application fee.

Whether the victim of cybersquatting proceeds by way of administrative procedure or Court proceedings depends on the identification and jurisdiction of the Defendant and the resources of the parties. Often the two procedures are complementary.

The law in this area is effectively an extension of passing off and Trade Mark protection and as such can be extremely complex. There is now an emerging body of case law on the Administrative procedures. Whilst an application can be made without legal assistance, advice should be sought in the first instance so all options can be considered. The last resort should be the Civil Courts.

This is a general guide on the law only. It is not intended nor should it be taken as legal advice.

Further advice should be sought from a professional legal adviser. For further information please contact Michael King on 028 9024 3141