Stephen M. Kramarsky
Stephen M. Kramarsky ()

If you hire a dozen marketing professionals to help you with your “Internet presence” you will get a dozen different opinions about exactly how to do that. But they will probably all agree on two things: Web and social media marketing is difficult, and “reputation” matters. The most effective marketing is highly targeted and personal—through company websites, blog postings, Facebook pages, Twitter streams and the like. Such marketing works precisely because the recipients have “opted in;” they have made the decision to follow the brand or at least check up on it periodically, and thus established themselves as interested potential customers. In that world, brand protection is of paramount importance. If the consumer is misled as to the source of the information, the brand will suffer and so will the consumer. But the conventional wisdom has been that the trademark laws, the traditional tools of brand protection, lack force in cyberspace—that the Internet is the “Wild West.”

In fact, that is not the case. The traditional trademark laws give strong protection to mark-holders against the infringing use of their marks on the Internet, if that use is confusing to consumers. In addition, Congress has passed a law—the Anticybersquatting Consumer Protection Act (ACPA)1—designed to address the proliferation of scam websites whose addresses are themselves confusing. That law has some interesting features, and a series of recent decisions in the Eastern District of New York against a repeat-offending cybersquatter offers a good opportunity to examine it and the other tools available to businesses that need to protect their brands.

Internet Domain Names

To start with the basics, it’s important to understand what the Internet actually is. The Internet is a network of computers all over the world, communicating with each other using a common “language” called TCP/IP. Computers use the Internet to communicate with each other, and thereby provide services like email, the Web, Skype, Twitter and a host of others. Those services all have their own “high level” languages, but they all rely on the underlying TCP/IP “language” for basic communication. Web servers, for example, are computers that “serve” Web pages to clients’ browsers. When you open a browser, your computer sends a TCP/IP message over the Internet, contacts the Web server (often indirectly) and asks for the data that comprises the Web page. The server provides it, and your computer’s browser turns it into an image on your screen.

To route these messages over the Internet, computers use numbers called IP addresses. Every computer on the Internet, from the giant servers that handle Google’s search infrastructure, to your laptop, to your cell phone, to your “smart” coffee maker, has an IP address assigned to it. Numerical IP addresses are long and hard to remember (and they are about to get longer, since we are running out), so commonly used IP addresses—such as website or email addresses—are associated with names called domain names.

Domain names are easily memorable names (say, Google.com) that are associated with a particular IP address. Internet users use them to access computers located at the associated IP addresses. Individuals and entities can register domain names through a number of private domain registration companies. Registration of a domain name allows the owner to attach its name to a given IP address, directing traffic to a given server. The body responsible for monitoring and administering this process is called the Internet Corporation for Assigned Names and Numbers (ICANN).

Domain names are organized into levels. The “top level” domains consist of the period and the word at the end of a domain name—for example, the .com in www.Google.com. Historically there have been comparatively few top level domains—including .com, .gov, .mil, .edu, .org, .net, and various country domains—and many of them had limited and specific purposes. Recently, however, ICANN has approved the release of a large group of new top level domains and it seems likely that the rush to acquire attractive new domains will result in renewed problems with cybersquatting.

Cybersquatting and the ACPA

At the height of the Internet bubble in the late 1990s, trademark owners faced a problem. The commercial Web was relatively young, and there was little law on the registration of domain names containing trademarks. Congress addressed this issue by passing the ACPA in 1999.

The purpose of the ACPA is to “protect the public from acts of Internet ‘cybersquatting,’ a term used to describe the bad faith, abusive registration of Internet domain names.”2 The ACPA established that a person will be liable to the owner of a protected trademark if the person:

(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and (ii) registers, traffics in, or uses a domain name that—(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark; [or] (II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark … .3

Since its passage, the law has become a powerful tool for brand protection, even as the scammers it is designed to thwart have become more legally and technically sophisticated. The recent decisions in Yung v. Trump provide a good overview of the current state of play.

The ‘Webadviso’ Cases

In Yung v. Trump, No. 11-cv-1413 (DLI) (VVP) (E.D.N.Y. 2013), plaintiff Yung, a self-described “domainer,” (sometimes going by the name “Webadviso”) brought an action against well-known real estate investor and public personality Donald Trump. Yung sought a declaratory judgment stating that his Internet domain names did not infringe on Trump’s trademarks or violate the ACPA. Trump brought numerous counterclaims, including claims for trademark infringement and dilution, and for violation of the ACPA. Trump eventually moved for partial summary judgment on several claims, including his trademark infringement and ACPA claims, as well as on Yung’s claim for declaratory judgment. Judge Dora L. Irizarry granted Trump’s motion with respect to the ACPA claim and denied the others as moot.4 Having done so, the court referred the issue of damages to a magistrate, who recommended an award of $8,000 per infringing domain name and an order that Yung transfer the infringing domain names to Trump.5 The court accepted the recommendation and entered the award.6

Trump’s claims against Yung were based on Yung’s practice of acquiring what he called “interesting and high value” domain names and either “parking” them with domain registrars or building websites on them. Yung owned nearly 200 domain names, many containing names of notable businesses including barclayscapitallehman.com, citigroupwachovia.com and goldmansachsgroup.com.” The specific domain names at issue in the Trump case were “trumpabudhabi.com, trumpbeijing.com, trumpindia.com and trumpmumbai.com” (the domain names).7

Trump argued that Yung was not using the domain names in good faith, but instead was trying to extort a fee for them. He noted that his companies owned domain names for his projects, including trump.com and similar sites, and that each individual Trump-branded project typically had its own domain name consisting of the word “trump” followed by the geographic location of the project, such as trumpchicago.com or trumpistanbul.com.tr.8 Trump argued that Yung was trying to capitalize on this practice by “cybersquatting” on domains Yung believed Trump would want for future projects. In response, Yung argued that the websites at the domain names were not run for profit and contained commentary, satire and complaints regarding Trump’s reality TV show, The Apprentice. The sites all contained disclaimers stating they were not approved by Trump.9

Trump’s lawyers wrote to Yung asserting trademark infringement and demanding the return of the domain names.10 The parties engaged in brief and ultimately unsuccessful settlement negotiations during which Trump offered $100 for the domain names and Yung stated that he believed the sites had “significant value,” but refused to make a specific monetary demand11—perhaps aware from previous litigation that a demand might be used against him under the ACPA. Trump then brought an arbitration in the World Intellectual Property Organization (WIPO) at which he prevailed, but Yung ignored the arbitrator’s order. Instead, Yung brought suit against Trump in the U.S. District Court for the Eastern District of New York.

On the motion for summary judgment, the court evaluated each of the statutory elements of Trump’s ACPA claim: determining (1) whether Trump had a distinctive or famous mark; (2) whether the domain names were identical or confusingly similar to the Trump mark; and (3) whether Yung had “a bad faith intent to profit from” the Trump mark. Importantly, the court also considered Yung’s fair use and First Amendment defenses against the claim.

First, the court found that there was “no genuine issue of material fact that the Trump mark is distinctive and entitled to ACPA’s protections,” noting that the marks had been successfully registered with the USPTO and used in commerce for over five years. This constituted conclusive evidence of the mark’s validity and Trump’s exclusive right to use it, and also gave rise to a presumption of inherent distinctiveness.12 Yung attempted to rebut the presumption of distinctiveness by arguing that the word “trump” had a literal, dictionary definition in the context of playing cards, but the court rejected that argument, noting that the mark was not being used in that context and so was distinctive as used.13

Second, the court found that the domain names were not “identical” but were “confusingly similar” to the Trump mark.14 Yung argued that the addition of geographic terms to the word “trump” rendered the domain names non-similar, but the court rejected this, noting that the domain names mimicked those used by Trump to promote Trump-branded projects in other locations. Thus, the addition of the geographic terms actually promoted confusion.15 The court also rejected Yung’s argument that his websites’ disclaimers alleviated any confusion, noting that the issue under the ACPA is whether the Web address itself promotes confusion, not the content once the user gets there. To hold otherwise, the court noted, would create a loophole that would swallow the entire statute, giving cybersquatters a free pass, contrary to Congress’s intent.

Third, the court looked at the nine, non-exclusive factors the ACPA lists as indicia of a party’s bad faith profit motive in registering a domain name. The court found the evidence of Yung’s bad faith “overwhelming.”16 An earlier case against Yung with nearly identical facts aided the court’s determination: Webadviso v. Bank of Am., 1009 WL 5177997 (S.D.N.Y. Dec. 31, 2009) (Chin, J.). The court noted that, as in Webadviso, there was no evidence that Yung had any intellectual property rights in the domain names nor had he done business using the word “trump”; the domain names were unrelated to Yung’s name or his business’s name; Yung admittedly sought to acquire “high value domain names,” which were only valuable because they used the Trump mark; the use of geographic terms in the domain names could have no purpose other than to confuse consumers; and Yung owned nearly 200 other domain names, many appropriating other well-known brands.17 Based on all of this—viewed through the lens of the prior decision in Webadviso—the court held that Yung was acting in bad faith.

Defenses Rejected

Concluding its analysis, the court considered and rejected Yung’s fair use and First Amendment defenses. The ACPA contains a “safe harbor” for persons who reasonably believe that their use of a domain name is “a fair use or otherwise lawful.”18 The court thus looked at whether Yung had a good faith basis to believe “that he was using the Trump mark as a description, parody, criticism or commentary”—the classic fair use analysis.19 The court found that Yung was not entitled to a fair use defense because the domain names themselves did not provide commentary or criticism or specifically indicate a website designed to do so, as might be the case with a complaint website such as “www.generalmotorssucks.com.”20

Further, the court found the websites themselves did not contain any significant parody, criticism, or commentary. Instead, the court found that Yung “haphazardly” created identical websites at each address that contained “minimal content under each category traditionally associated with fair use (e.g., news, politics, criticism) in an attempt to benefit from the ACPA’s safe harbor.” The content included a chart listing the seasons of Trump’s television shows and their declining ratings, a news heading containing a Google news feed of automatically generated real estate headlines, and a political commentary section consisting “largely of off-color jokes about former-Congressman Anthony Weiner posted in 2011.”21 The court found this content insufficient to navigate Yung into the safe harbor. In fact this sort of cynical effort by a repeat offender to “hide” in the safe-harbor provisions of the ACPA likely cuts against a finding of good faith.

Sophisticated Scammers, Courts

The takeaway from the Yung/Webadviso cases is very positive for brand owners. The conventional wisdom has been that courts have trouble understanding the reputational issues facing brands on the Internet and that litigation on these kinds of issues is, at best, a crapshoot. It is true that litigation can be expensive and unpredictable, and that other avenues (such as ICANN dispute resolution or WIPO arbitration) may be better options in the first instance. But these and other recent cases have made it clear that courts are increasingly educated in these matters and will not be duped, even by relatively sophisticated scams and efforts to “work around” the law. The courts have demonstrated increasing impatience with such tactics.

Trump, for example, sought the maximum penalty from Yung under the ACPA—$100,000 for each of the four domains. In the end the magistrate judge recommended a fine of $8,000 each, not because Yung was anything less than 100 percent culpable, but because the judge determined that a $32,000 fine would be sufficient to deter future similar conduct by Yung, who was unemployed and had only $250 in the bank. However, the judge closed with this warning: “[T]he plaintiff now has two strikes against him. Should he see fit to continue his unlawful conduct, he should not expect such leniency the third time around.”22

Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex commercial and intellectual property litigation. Joseph P. Mueller, an associate at the firm, provided substantial assistance with the preparation of this article.

Endnotes:

1. 15 U.S.C. §1125(d).

2. Report to Congress: The Anticybersquatting Consumer Protection Act of 1999, section 3006 concerning the abusive registration of domain names, U.S. Patent and Trademark Office, available at http://www.uspto.gov/web/offices/dcom/olia/tmcybpiracy/repcongress.pdf.

3. 15 U.S.C. §1125(d)(1)(A).

4. Yung v. Trump, 927 F. Supp. 2d 32, 35-36 (E.D.N.Y. 2013).

5. Yung v. Trump, 2014 WL 819417 (E.D.N.Y. Feb. 28, 2014) .

6. Yung v. Trump, 2014 WL 1257761 (E.D.N.Y. March 26, 2014).

7. Yung, 927 F. Supp. 2d at 35.

8. Id. at 36.

9. Id. at 36-37.

10. Id. at 37.

11. Id. at 37.

12. Id. at 39

13. Id. at 39.

14. Id. at 40-41.

15. Id. at 41.

16. Id. at 43.

17. Id. at 44-45.

18. Id. at 45 (quoting 15 U.S.C. §1125(d)(1)(B)(ii)).

19. Id. at 46.

20. Id. at 46-47.

21. Id. at 46.

22. Yung v. Trump, 2014 WL 819417, *6.