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In a case of first impression, the 1st U.S. Circuit Court of Appeals recently held in Sallen v. Corinthians Licenciamentos2001 U.S. App. LEXIS 25965 (1st Cir. 2001), that a provision of the Anti-Cybersquatting Consumer Protection Act satisfied the U.S. Constitution’s case or controversy requirement and thus provided a domain name registrant with a cause of action in federal court, after the World Intellectual Property Organization (WIPO) determined that the domain name registrant was a cybersquatter under the Uniform Domain Name Dispute Resolution Policy (UDRP), and was ordered to transfer the domain name. This case was appealed from the U.S. District Court for the District of Massachusetts, where the court dismissed the complaint for lack of subject matter jurisdiction, finding no actual case or controversy existed between the parties. The complainant in the case, Jay D. Sallen, a U.S. citizen, was the owner of the registered domain name, corinthians.com. Sallen registered his domain name in August 1998, with Network Solution Inc., a domain name registrar accredited by the Internet Corporation for Assigned Names and Numbers (ICANN). Upon registration of a domain name with a registrar, a registrant agrees to a registration agreement, which incorporates the terms of the UDRP. Essentially, the UDRP governs disputes between third-party trademark owners, and registrants of domain names that may be “cybersquatting.” Cybersquatting typically occurs when an individual registers a domain name that incorporates or is similar to another owner’s trademark, with an intent to profit by selling the domain name to the trademark owner or by diverting Internet traffic away from the trademark owner’s Web site. (e.g., registering cocacola.com, which contains Coca-Cola’s trademark, and then attempting to sell the domain name to Coca-Cola for the purpose of profiting). The UDRP requires a registrant “to submit to a mandatory administrative proceeding,” if a third party asserts the following three requisites:
The domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights. The registrant has no rights or legitimate interests in respect of the domain name. The domain name has been registered and is being used in bad faith.

This administrative proceeding is conducted by an ICANN approved dispute resolution service provider. Currently, there are four approved service providers, however, the majority of the disputes are handled by WIPO, based in Geneva. In this case, Corinthians Licenciamentos Ltda, (CL), a Brazilian corporation with trademark rights in the mark CORINTHIAO, which is the Portuguese equivalent of “Corinthians,” the name of the Brazilian soccer team, filed a complaint with WIPO, after Sallen offered to sell the domain name to the company. Specifically, CL sought relief under the UDRP, asserting that Sallen’s domain name was confusingly similar to its mark; that Sallen had no rights in the mark; and that Sallen registered and used the domain name in bad faith. WIPO determined that Sallen’s mark was “identical or confusingly similar” to CL’s mark; that Sallen was “not making a legitimate noncommercial or fair use of the domain name;” and that Sallen registered the domain name in “bad faith.” WIPO ordered Sallen to transfer the domain name to CL. After Sallen transferred the domain name to CL, Sallen filed suit in federal district court seeking declaratory relief to establish that Sallen’s use and registration of the domain name were not unlawful under the Anti-Cybersquatting Consumer Protection Act (ACPA), codified at 15 U.S.C. � 1114, and therefore, transfer of the domain name was improper. CL moved to dismiss the complaint for lack of subject matter jurisdiction because Sallen sought relief under the ACPA, and CL had no intent to sue Sallen under the ACPA. The district court granted the motion to dismiss, finding no actual case or controversy existed between the parties, as there was no threat of suit because CL stated that it had no intentions of suing Sallen under the ACPA. The 1st Circuit reversed the district court’s holding and held that the ACPA does confer jurisdiction on the federal courts, and thus the complaint should not have been dismissed. The court noted the two prerequisites to jurisdiction: a statutory grant and consistency with Article III of the Constitution. In order to confer jurisdiction, a federal court must have subject matter jurisdiction over a dispute; thus, “a statute must confer jurisdiction on federal court and the exercise of jurisdiction must be consistent with the Constitution.” Osborn v. Bank of the United States, 22 U.S. 738 (1824). The court noted that federal district courts have original jurisdiction “of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. � 1331. Here, the court found, “Section 1114(2)(D)(v) explicitly provides Sallen with a cause of action so there is no question that Sallen’s action arises under federal law for purposes of Section 1331.” Section 1114(2)(D)(v) provides: “A domain name registrant whose domain name has been suspended, disabled, or transferred under a policy described under clause (ii)(II) may, upon notice to the mark owner, file a civil action to establish that the registration or use of the domain name by such registrant is not unlawful under this chapter. The court may grant injunctive relief to the domain name registrant, including the reactivation of the domain name or transfer of the domain name to the domain name registrant.” However, the court opined that “[t]he question here is whether Congress has extended the federal courts’ jurisdiction beyond Article III’s limits by providing a cause of action to individuals such as Sallen.” Article III of the Constitution states that judicial power shall extend to all cases “arising under” the laws of the United States. Thus, a statute providing a cause of action where an Article III case or controversy does not exist, would be unconstitutional. Here, the court held that Section 1114(2)(D)(v) allows federal jurisdiction over the case, because an Article III controversy exits. “Although CL has stated that it has no intent to sue Sallen under the ACPA for his past actions related to corinthians.com, there is indeed a controversy between Sallen and CL.” Sallen claims legitimate rights in the domain name which he was required to transfer to CL, and CL claims it has “mutually exclusive rights” to the domain name. The court dismissed a number of arguments made by CL. To begin with, CL argued that “a reasonable apprehension of suit” is required to meet Article III’s case or controversy standard. The court dismissed this argument, noting that other courts have held “controversy renders the “reasonable apprehension” question irrelevant.” CL also asserted that there cannot be jurisdiction, because there is no dispute under the ACPA. However, the court also dismissed this argument stating that this argument incorrectly “assumes that a declaration of compliance with the ACPA is only relevant to defend against a potential lawsuit under that very statute and that a declaration of Sallen’s compliance with the ACPA could not redress his UDRP defeat.” The court ruled this was incorrect because Section 1114(2)(D)(v) specifically provides a cause of action to a registrant that can show compliance with the ACPA. Thus, “[a] declaration of Sallen’s compliance with the ACPA would redress his loss of corinthians.com in the UDRP proceeding.” Section 4(k) of the UDRP specifically states that the mandatory administrative proceeding requirements do not prevent either party from “submitting the dispute to a court of competent jurisdiction for independent resolution.” Finally, CL argued that WIPO determines if there is compliance under the UDRP, and not the ACPA, and that Sallen waived his rights under the ACPA when he agreed to the standards under the UDRP. The court disagreed, stating Section 1114(2)(D)(v) of the ACPA allows federal courts to determine compliance under the ACPA, and ultimately “undercut the rationale of the WIPO panel decision.” Since the UDRP cannot provide federal courts jurisdiction, the court must determine if Congress provided a cause of action under the ACPA, and thus conferred jurisdiction. This court found that Congress explicitly provided a cause of action to registrants that lose their domain names in UDRP proceedings. Registrants may seek declaratory relief that they are in compliance with the ACPA, and may request an injunction to return the domain name, or reactivation of the domain name. Therefore, a declaration of compliance by a federal court trumps a finding of noncompliance under the UDRP. The court found support for its decision, by reviewing the legislative history of Section 1114(2)(D)(v), wherein Senator Orren Hatch stated the following: “A domain name registrant whose name is suspended in an extra-judicial dispute resolution procedure can seek a declaratory judgment that his use of the name was, in fact, lawful under the Trademark Act. This clarification is consistent with other provisions of the reported bill that seek to protect domain name registrants against overreaching trademark owners.” Thus, this court determined that “subsection (D)(v) is best understood to provide domain name holders with a cause of action to rectify reverse domain name hijacking by trademark holders using the UDRP process to require registrants to transfer domain names originally held by rightful users under U.S. law.” The UDRP has defined “reverse domain name hijacking” as “using the [UDRP] Policy in bad faith to attempt to deprive a registered domain-name holder of a domain name.” Essentially, this decision means that domain name registrants that have been unsuccessful in defending their domain names in UDRP proceedings, now have another remedy. They may seek relief in U.S. district courts by showing compliance with the ACPA, and essentially override UDRP decisions. The overlap between the ACPA and the UDRP has the potential to severely limit the strength of the UDRP, at least where the name at issue appears sufficiently valuable to institute a federal action. However, domain name registrants may need this protection in order to protect themselves from reverse domain name hijacking by overreaching trademark owners. For trademark owners, this decision means they should re-evaluate filing complaints under the UDRP that would be questionable under the slightly different ACPA standards. Nicole K. McLaughlin is an intellectual property attorney in the Philadelphia office of Duane Morris. She practices trademark and copyright law.

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