From the President: Trademarking the Net

Net-based shopping is becoming commonplace, and the value of Internet real estate has become obvious both to established companies and to new Net-based companies. Name recognition is synonymous with an easy-to-remember domain name. Because there is only one dot-com top-level domain name, names in the dot-com domain have become a scarce resource. The irony is the current set of domain names is an artificial construct, created before the rush to cash in on the Internet and e-commerce. In theory, the number of domain names that can be created is unbounded, but the practical realities might force us to continue living under the current regimen, even though it is obviously flawed. The question is: Will the Net survive efforts to apply trademark law to domain names, and, if so, how will it look in the future?

Trademark law has become intertwined with doing business—or just hanging out—on the Internet. The kind of trademark law that some envision for the Net is much more restricted than that which exists in "real life." In the U.S. there are at least two dimensions for trademarks: area of business and physical location. Thus, there is no problem with United Van Lines and United Airlines coexisting. Few people who want to fly from San Francisco to New York are likely to contact United Van Lines, and people with a household of furniture to move are unlikely to purchase tickets on United Airlines. But there can be at most one www.united.com. (It belongs to an Internet messaging company.) Similarly, there could be a Simon’s Shoe Store in Reno and another Simon’s Shoes in Miami.

It’s bad enough the current system of domain names collapses a two dimensional space into a small set of points. Worse yet is the effort to restrict look-alikes on the Net. A dramatic example is the situation that pits etoys.com against etoy.com. In October 1995, etoy, a group of European artists, started an eToy.com Web site. Roughly two years later eToys Inc., an Internet toy retailer (etoys.com) started its Web site; it also filed for a U.S. trademark. When the owners of the etoy.com Web site learned of the etoys.com trademark filing, they filed for a trademark. A trademark was granted to eToys.com, but the etoy.com trademark request is still pending. Meanwhile, eToys attempted to purchase the etoy.com Web site for about $400,000 in stock and cash. When the offer was rejected, eToys sued etoy. The lawsuit claims that "the antisocial, obscene, and offensive images associated with defendants’ use of the mark etoy, both on the Internet and elsewhere, have tarnished the eToys mark and the eToys brand name…" In November 1999 a federal judge in California issued an injunction against etoy.com. Because of potential fines of up to $10,000 per day, the etoy.com Web site was shut down. Etoy appealed the decision, and in December eToys announced it had offered to drop its lawsuit against etoy. However, eToys also either requested, or stating as a precondition (depending on which release you read), that etoy "give good faith consideration … to concentrating the profanity, nudity, and violence that is sometimes part of the etoy corporation message on etoy corporation’s other Web sites." An etoy lawyer, quoted in the New York Times, rejected the eToys request, saying "etoy cannot give eToys veto power over the content on its site." On January 25, 2000, eToy droped its lawsuit against etoy.

The etoy vs. etoys dispute raises several disturbing issues. Even if one accepts that U.S. law should apply to organizations located in Europe, etoy and eToys differ both in physical location and in area of business. In fact, etoy is not even a commercial entity; it is an artists group. So, if the case did not involve the Internet, it’s unlikely that the injunction would have been issued.

The situation may worsen, thanks to the recently passed bill entitled, "The Anticybersquatting Consumer Protection Act." This law—rushed into existence without broad discussion or public interest participation—bypasses the Uniform Domain Name Dispute Policy adopted by ICANN (Internet Corporation for Assigned Names and Numbers) in late October 1999. This international agreement, hammered out over years of work and with many diverse parties, states that an owner of a domain name being contested by a "complainant" must submit to an international cyberspace tribunal if accused of bad faith registration of domain names, otherwise known as "cybersquatting." The rules provide a very fast, inexpensive mechanism for removing domain names from true cybersquatters. The worst that can happen to the domain name owner under ICANN is that the owner loses the domain name.

By contrast, the federal legislation makes the domain name owner liable for civil action with the possibility of fines of between $1,000 and $100,000 per domain name, even without a finding by the court of damages to the complainant. Confronted with the possibility of a significant fine, many domain name owners who happen to be individuals, small businesses, and noncommercial organizations are likely to relinquish their domain names when challenged by a large trademark holder, even if the threat against the domain name is entirely frivolous.

While cybersquatting is frequently discussed, "reverse domain name hijacking" (RDNH) is not. RDNH is the bad faith prosecution of domain name owners. The ICANN policy balances the rights of both sides, including allowing the domain name holder to bring suit against the complainant in a convenient jurisdiction. If the suit is brought in a timely manner, the domain name will not be transferred from the domain name holder to the complainant.

Another major problem with the legislation is that it uses a legal construct called "in rem" (to take an action against a thing, in this case the domain name, as opposed to "in personam," which means to take an action against a person) to bring most domain name disputes under the jurisdiction of U.S. law. Consequently, anyone holding a domain name obtained from a U.S. registrar or from the U.S.-based registry Network Solutions—all dot-coms, dot-orgs, and dot-nets—now can be required to defend that domain name in a U.S. district court under U.S. law, independent of where the person or company may be physically located.

I suspect the rest of the world will not look kindly on the claim that all individuals and organizations with, for example, a dot com domain name are covered by U.S. law. As a result, we may start seeing other countries pass legislation that may or may not be in conflict with U.S. law. An unfortunate outcome could be the balkanization of the Net, making e-commerce difficult, if not impossible. Without a healthy e-commerce, many of the financial underpinnings of the Internet could collapse. I’m sure this was not the intent of the writers of the U.S. legislation.

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