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According to the federal statute designed to prevent the practice, cybersquatting is the act of "registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else." In a typical scenario, the cybersquatter offers to sell the domain name to the entity associated with the particular trademark for an inflated price. This offer to sell is sometimes viewed as evincing bad faith and therefore actionable in court if the owner wishes. In others, the offer is considered reasonable, or at least not indicative of bad faith, and therefore the trademark owner is forced to either purchase the domain or accept the consequences of the existence of a substantially similar domain name. This dilemma can create difficulties for intellectual property owners. If they wish to sue, various mechanisms exist that purport to combat cybersquatting. Most prominent of those is the statute quoted above, the Anticybersquatting Consumer Protection Act (ACPA) (15 U.S.C. §1125(d)). The purpose behind the ACPA is to "provide clarity in the law for trademark owners by prohibiting bad faith and abusive registration of distinctive marks as Internet domain names."

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