Microsoft scored a notable victory Wednesday in the war on so-called cybersquatters–the folks who set up websites with URLs that are just a typo or two different from those of popular sites. Seattle federal district court judge Ricardo Martinez issued a 9-page opinion allowing Microsoft to proceed with what he called “a novel cause of action for contributory cybersquatting.”

Microsoft, represented by Mark Parris of Orrick, Herrington & Sutcliffe, filed suit last April against two companies, Digispace Solutions and yMultimedia, after they allegedly induced others to register domain names that allegedly included Microsoft trademarks or misspellings of some of Microsoft’s brand names. The URLs, with such names as, led users to sites where visitors who clicked on a link for MSN Messenger were sent to a site controlled by the companies or to “Smiley Central,” where they were asked if they wanted to download emoticon products.

Cybersquatting is illegal under the federal Anticybersquatting Consumer Protection Act of 1999. But Microsoft wanted to take the law a step further, according to Judge Martinez, by asserting a novel theory of “contributory cybersquatting.”

Microsoft and Orrick argued in an amended complaint that Digispace and yMultimedia “actively and intentionally induced others” to infringe and cybersquat on Microsoft trademarks by providing instruction on how to do so, purportedly as a way for squatters increase traffic to their own sites. Microsoft also asserted that Digispace and yMultimedia sold a software product that allowed buyers easily to set up sites that used Microsoft’s trademarks. The Microsoft complaint names not only the two companies and their founders, but also 50 John Doe defendants who, according to the complaint, were induced to infringe Microsoft copyrights.

Digispace and yMultimedia’s lawyers, Derek Linke and Derek Newman of the IPboutique Newman & Newman, sought to dismiss Microsoft’s claims that Digispace and yMultimedia had induced violations of the federal anticybersquatting law. “No court has ever recognized a cause of action for inducement under the ACPA,” the defense contended in its motion to dismiss. “Similarly, no court has ever recognized a cause of action for induced trademark dilution. Both claims should be dismissed here.”

Judge Martinez agreed that the contributory claim had “neither been explicitly addressed by an appellate court nor by statute.” But he said several federal district courts had at least discussed “the notional cause of action,” and ruled that it could proceed. He also allowed Microsoft to move forward on what he called a novel cause of contributory trademark dilution. While Judge Martinez said statutes and appellate courts had not addressed the issue, he said it “would be inconsistent with the Trademark Dilution Act to prohibit a cause of action for contributory dilution.”

Orrick’s Parris referred our request for comment to Microsoft, which said in a statement that it’s pleased with Judge Martinez’s ruling. “As a company that invests in and values its relationships with its customers, including many families, we will not tolerate the deceptive and exploitative misuse of our protected trademarks,” said Bill Harmon, an associate general counsel in Microsoft’s digital crimes unit, in the statement. “We believe we have a responsibility to our customers to try to stop deceptive activity that threatens the safety and reliability of their online experience.”

Linke told us his clients deny the allegations against them. Microsoft’s assertions “are not true,” he said, adding that Digispace is an advertising company, and its business has “nothing whatsoever to do with Microsoft.”