Domain name Squatting, or Cybersquatting
Cybersquatting means registering domain names reflecting the names or trademarks of existing businesses, with the sole purpose of selling these names back to the businesses when those businesses decide to put up a website. This practice started when most companies had not yet understood the commercial opportunities that the World Wide Web could provide them.
Anyone was free to register a name as long as they paid the appropriate fee. No law required a domain owner to actually use the names registered, or to have a legitimate claim to them (for example, IBM.com could have been registered to anyone had IBM not taken it first).
In fact, the law had not caught up yet with the Internet revolution and so there were no provisions in place to avoid the situations created by cybersquatters.
Some established companies that were affected by the practice of cybersquatting are Hertz, Panasonic, and the San Francisco Chronicle.
Cybersquatting is becoming more and more rare these days because most businesses are aware of the need to register their names as domain names, but also because the law is starting to address cases of "bad faith" when registering a domain name.
For example, Microsoft and Yahoo were affected by cybersquatters overseas. However, both companies sued and won.
In other words, the law now requires you to prove association with a definitive domain name, such as Kmart.com. But the law is still quite loose. You could legitimately own the Kmart.com domain if you had a licensed business called Ken's Mart,
or even Ken's Discount Mart. Otherwise, you would be forced to release ownership of that domain if Kmart incorporated contested ownership.
What are the legal ramifications of Cybersquatting?
Cybersquatting is the practice of registering, selling, or using a domain name that is similar or identical to a trademark or a famous name, with the intention of profiting from the goodwill associated with that trademark or name. Cybersquatting is illegal and can lead to a range of legal consequences, including:
- Trademark infringement: Cybersquatting can constitute trademark infringement if the domain name is identical or confusingly similar to a trademark. This can lead to civil liability and damages for the cybersquatter.
- Anti-cybersquatting consumer protection act (ACPA): The ACPA is a federal law that provides a cause of action for trademark owners who have been victims of cybersquatting. The law allows trademark owners to sue cybersquatters and seek damages of up to $100,000 per domain name.
- Uniform Domain-Name Dispute-Resolution Policy (UDRP): The UDRP is a process for resolving disputes over domain names that are registered with the Internet Corporation for Assigned Names and Numbers (ICANN). The UDRP provides a mechanism for trademark owners to file a complaint against a cybersquatter and have the domain name transferred to them.
- Criminal penalties: In some cases, cybersquatting may be considered a criminal offense, especially if it involves fraud or deception. For example, the use of a domain name to trick people into giving away personal information or money can be prosecuted as a form of fraud.
In general, cybersquatting is considered a form of trademark infringement, and trademark owners can take legal action to protect their rights. The legal consequences of cybersquatting can include civil liability, damages, and criminal penalties.
In the early and mid-1990s, "entrepreneurs" recognized this grand opportunity. In a style reminiscent of the old Gold Rush days, they raced to tie up as many of those good corporate names as they could, whether it was
harvard.edu. Later, they would send a demand letter to those entities and offer to sell their domain names back at a tidy profit. Or the new owners would sit on their names and wait for that interest, conjuring up the concepts of 1) cybersquatting and 2) cyberpirating.
When one adds to this equation the various classifications (i.e., from .com and .org to the later introduced .biz and .info) with the different country designations that are possible, it is easy to see the large opportunities created to tie up good corporate names at a good profit.
A brisk market in the buying and selling of domain names began just hit the key word domain name in your search engines and see what arises. The people who registered general names, such as business.com or loans.com, made excellent business decisions. One
Houston businessman paid $150,000 in 1997 for the rights to business.com, then sold that to a California company for a cool $7.5 million 2 years later. In 2000, mortgage.com was sold for $1.8 million and loans.com for $3 million.
Without any statutory guidance, the courts handed down mixed decisions as to when a mark holder would prevail, if at all, over a cybersquatter and any given domain name. The reason: The law was clear at the time that domain-name registrations and trademarks and service marks, whether registered or not, were two different concepts. Because there was no right by itself to use a mark as a domain name, owning one did not necessarily convey ownership rights to the other.