As commercial businesses began to cross the frontier into the World Wide Web, many individuals rushed to claim parcels of domain names much as happened in the West during the Oklahoma land rush of 1899.  In 1899, Congress had made no provision for civil government, nor provided for towns, nor laid out streets.  The "first-come, first-serve" mentality was the "rule" to live by, where anyone could enter the frontier border and claim ownership of any unclaimed parcel.

History is repeating itself, but this time the prize is not land but choice WWW "domain names," a commodity which, unlike land, is not unique and often represents highly marketed, known brands widely recognized by consumers.  Squatters began snatching up the choice "domain names" for the sole purpose of reselling them to, what many considered to be, the rightful owners.  This inevitably led to legal disputes that pitted the owners of famous brand names against the squatters who claimed ownership of the domain name of the same name.  Thus, while the Internet and electronic commerce afforded brand holders with unique opportunities to reach consumers throughout the world by promoting trademarks in a new global medium, over the past decade, the Internet also proved to be a valuable territory for a new form of "piracy," known as "cybersquatting."

Cybersquatting refers to the bad faith misappropriation of trademarks as Internet domain names and recently was characterized by the World Trade Organization (WIPO) as a "predatory and parasitical practice[]." (Statement of Senator Patrick Leahy) Those fighting to prohibit the practice of cybersquatting claim it "damages electronic commerce and the equity of valuable U.S. brand names, upon which consumers are increasingly relying to locate the true source of genuine goods and services on the Internet."  Sarah B. Deutsch, Squatting The Cybersquatters - The Anticybersquatting Consumer Protection Act Helps Fight Cyberpiracy of Brand Names, 4 No. 6 Elec. Banking L. & Com. Rep. 1 (Nov. 1999).  Conversely, there are those who claim that the Internet is the new frontier where the "you snooze, you loose" principle governs as well as those opponents of Cybersquatting legislation who believe it "infringes free speech rights, overlooks small business and individual interests, and lacks international scope."  Aaron L. Melville, New Cybersquatting Law Brings Mixed Reactions From Trademark Owners, 6 B.U.J. Sci. & Tech. L. 13, 9 (June 1, 2000).

Cybersquatting was born of the "first-come, first-serve" principle of domain name registration.  Since 1992, Network Solutions, Inc. ("NSI"), who handled the registration and administration of domain names allowed the registrant, for a nominal $100 fee, to register any name not previously registered.  For new developments in domain name registration see James Niccolai, Register.com Braces for Competition.  As a result of NSI system's simplicity, many names were registered by entities without the trademark rights to those names.  Some of these entities were know as cybersquatters, "speculator[s] who knowingly reserve[] a trademark as a domain name to sell it for profit."  Elizabeth Robinson Martin, Note, "Too Famous to Live Long!"  The Anticybersquatting Consumer Protection Act Sets its Sights to Eliminate Cybersquatter Opportunistic Claims on Domain Names, 31 St. Mary's L.J. 797, 808-810 (2000).  Since no law specifically addressed the emerging problem of cyberpiracy, domain name trademark cases were brought under trademark and anti-dilution statutes.

In the case of eToys.com, a customer, who apparently had gone to Etoy.com (the host of an international art site) by mistake, became incensed over the "purportedly offensive language" it believed had been sanctioned by eToys.com and threatened to discontinue its support of the eToy site.   According to eToys' suit against Etoy, brought soon thereafter, the confusingly similar site had diluted the value of the eToys' trademark and infringed upon its trademark.  eToys obtained a preliminary injunction against Etoy but soon thereafter dropped its suit under increased pressure by the public to co-exist.  See Andrew G. McCormick and Laura N. Mankin, Squatting Web Domains for Big Money As Popular As Ever.

Still another breed of "cybersquatters," or the "true" cybersquatters, began to register famous names, holding them ransom until the trademark's owner paid an exuberant fee.  Dennis Toeppen, "poster child for the cybersquatter," gained notoriety after registering "Panavision.com," which consisted of a collection of photographs of the City of Pana, Illinois.  Panavision International attempted to register its own name "panavision.com" only to find Mr. Toeppen had beaten them to it.  Mr. Toeppen offered to sell the name for $13,000, this, according to Mr. Toeppen, was the "cheap and simple" method by which Panavision International could acquire its own name.  See Jeremy D. Mishkin, Master of Your Domain - An Overview of the Anticybersquatting Consumer Protection Act, 18-SPG Comm. Law. 3 (Spring 2000) (Mr. Toeppen sent a memorable letter to Panavision International after he received several cease and desist letters from their attorneys in which he wrote:  "If your attorney has advised you otherwise, he is trying to screw you.  He wants to blaze new trails in the legal frontier at your expense.  Why do you want to fund your attorney's purchase of a new boat (or whatever) when you can facilitate the acquisition of "Panavision.com" cheaply and simply instead."  Apparently, Mr. Toeppen had similar 'cheap and simple' solutions to offer to other companies, since he had registered domain names similar to Delta Airlines, Neiman Marcus, Eddie Bauer, and over 100 other marks.).

Panavision International took Mr. Toeppen to court alleging violations of the Federal Trademark Dilution Act ("FTDA"). The Ninth Circuit found in favor of Panavision and dismissed Mr. Toeppen's argument that he had not used the mark in a commercial manner, as required under the FTDA. Specifically, it held:

Toeppen's argument misstates his use of the Panavision mark.  His use is not as benign as he suggests.  Toeppen's a spoiler, preventing Panavision and others from doing business on the Internet under their trademarked names unless they pay his fee . . . Toeppen made a commercial use of Panavision's trademark.  It does not matter that he did not attach the marks to a product.  Toeppen's commercial use was his attempt to sell the trademarks themselves.

Cybersquatting does not injure only trademark owners or owners of a personal name protected as a mark, consumers are often times the victims as well.  As Judiciary Chairman Orrin Hatch, Republican of Utah, stated:

In many cases, the domain name that takes consumers to the Internet site and the graphic interface that greets them when they get there are the only indications of source and authenticity, and legitimate and illegitimate sites may be indistinguishable in cyberspace. . . .  So if a bad actor is hiding behind a domain name bearing someone else's trademark, an online consumer is at serious risk of being defrauded.  The result, as with other forms of trademark violations, is the erosion of consumer confidence in brand name identifiers and in electronic commerce generally.

President William Jefferson Clinton signed the Anticybersquatting Consumer Protection Act into law on November 29, 1999 after unanimous consent by the Senate. The bill, signed into law as P.L. 106-113 and codified at 15 U.S.C. §1125(d), is designed to "protect consumers and promote electronic commerce by amending certain trademark infringement, dilution, and counterfeiting laws," creating a new cause of action for trademark owners against cybersquatters as well as providing protection against the unauthorized registration of personal names as domain names.

The bill does not provide blanket protection to the trademark owner or owner of a personal name protected as a mark, rather it provides a remedy against the "bad faith" appropriation of the mark.

A synopsis of the ACPA is as follows:

The Act provides remedies against anyone who, with a bad faith intent to profit, registers, traffics or uses a domain name that:

• Is identical or confusingly similar to a mark that was distinctive when the domain name was registered;
• Is identical, confusingly similar, or dilutive of a mark that was famous when the domain name was registered;
• or Infringes marks and names protected by statute such as the Olympic symbol or Red Cross.

Tests for Bad Faith

Factors showing bad faith include the registrant's intent to divert customers, whether the registrant offered to sell the domain name, the warehousing of multiple domain names owned by others and the intent to tarnish or disparage a brand.

The court can also consider factors that may establish the absence of bad faith, including the registrant's genuine prior use of the domain name, any trademark or other intellectual property rights in the domain name, whether the domain name is the legal name or the commonly known name of the registrant, and the registrant's valid noncommercial or fair use of the domain name.

Injunctions and Damages

Remedies include injunctive relief, the defendant's profits, actual damages and costs, or statutory damages, which can be awarded in the court's discretion from $1000 to $100,000 per infringing domain name. Attorneys' fees are also provided. However, monetary relief is available only for domain names registered against [sic, after] the Act's effective date of November 29, 1999.

In Rem Jurisdiction

A key weapon against cybersquatters who can't be served with process (either because they are outside the U.S. or registered under aliases) is "in rem" jurisdiction. This allows a trademark owner to sue the infringing domain name itself. A court can order the forfeiture, cancellation, or transfer of the domain name in the U.S.A. in an in rem case, but damages are not available.

Personal Names Protected

The Act also prohibits the unauthorized registration of a domain name that is the same as or confusingly similar to the name of another living person, if done with intent to profit from the domain name by selling it for financial gain to such person or a third party. Under this section, which is not part of the Lanham Act, courts can order the forfeiture or cancellation or transfer of the domain name. Monetary damages are not available, but the court may award costs and attorneys' fees to the prevailing party in appropriate cases.

Since the enactment of the ACPA, many notable entities, such as Harvard University, Exxon/Mobil, and the National Football League, all having fallen victim to cybersquatters, have filed lawsuits.  But not until March, 2000, did an appellate-level court interpret the ACPA.  Then, the United States Court of Appeals for the Second Circuit ordered a Christmas tree farm to relinquish its hold on the domain name sportys.com. to its trademark owner, Sportsman's Market, Inc.  The Second Circuit stated: "[W]e think it is clear that the new law was adopted specifically to provide courts with a preferable alternative to stretching federal dilution law when dealing with cybersquatting cases."  Sporty's Farm L.L.C. v. Sportsman's Mkt. Inc., Docket Nos. 98-7452 (L) and 98-7538 (XAP) (2d Cir. Feb. 2, 2000).

The case had a dubious beginning.  The ultimate loser, Sporty's Farm, brought suit seeking a declaration that it owned the domain name sportys.com.  Sportsman's Market Inc. counter sued under the FTDA, the Lanham Act, and the Connecticut Uniform Trade Practice Act ("CUTPA").  Under the lower court's ruling, Sporty's Farm violated the FTDA but had not infringed the Sportsman's trademark because the products sold by each entity were distinct.  During the appeal, the ACPA became law.  This new weapon against "cybersquatting" was exactly what Sportsman's Market Inc. needed and it had little difficulty persuading the Second Circuit of the same.

The Second Circuit held that Sporty's Farm's use of sportys.com violated the ACPA.  Specifically, according to the Second Circuit decision, "Sporty's is a distinctive mark, and it is confusingly similar to the sportys.com domain name . . . Sporty's Farm acted with `bad faith intent to profit.'"  Domain Name Transfer Ordered in First Appellate Ruling on ACPA, Sporty's Farm v. Sportsman's Mkt., 6 No. 16 Andrews Intell. Prop. Litig. Rep. 3 (March 22, 2000).  The "bad faith intent to profit" was demonstrated by several factors.  First, according the panel, Sporty's Farm's explanation for it use of the domain name was "more amusing than credible."  Id.  Second, Sporty's Farm formed nearly nine months after the registration of the domain name, sportys.com.  Finally, the original owner of the domain name, Omega, a competitor of Sportsman's Market, "did not sell the domain to Sporty's Farm until after the lawsuit was filed."  Id.

The ACPA remains in its infancy and, undoubtedly, its effectiveness will only be determined after numerous years of court interpretation.  But, of course, even in its infancy, critics and supporters abound.  One concern, voiced by United States Senator Patrick Leahy, is that the Act "would have a number of unintended consequences that could hurt rather than promote electronic commerce."  Statement of Senator Patrick Leahy.  Senator Leahy believes the Act's coverage is too broad, and one argument he makes in support of this belief is that legitimate "protest" sites would become criminal, examples he cites are "boycott-cbs.com" and "www.PepsiBloodbath.com."

The argument that free speech rights will be infringed in this respect is misguided. What Senator Leahy does not take into account is the availability of all viable trademark or dilution defenses.  Easily, these domain site owners could argue that the site is either a "parody" or was used for a "noncommercial or fair use."  Since the Act's purpose is to protect famous names from "profiteers" or those who purposely attempt to defraud the public, legitimate "protest" sites would likely prevail.  This is evident by the Act's definition of "bad-faith" which "allows for `lawful noncommercial or fair use of the mark' in a location that can be accessed through the challenged domain name."  Mishkin, supra, at 5-8.

Of further concern is the limited, non-global scope of the ACPA.  Cybersquatting, like the Internet itself, is not limited by territorial boundaries.  Some critics believe a better solution is that envisioned by the Uniform Domain Name Dispute Resolution Policy (the "Policy"), adopted on August 26, 1999 by the Internet Corporation for Assigned Names and Numbers ("ICANN").  Pursuant to the Policy all disputes are submitted to the World Intellectual Property Organization's ("WIPO") Arbitration and Mediation Center.

In the WIPO's first decision under the Policy, namely World Wrestling Federation Entertainment, Inc. v. Bosman, it found: "(1) that the domain name was identical or confusingly similar to its own registered trademark and service mark; (2) that Bosman did not have any rights or legitimate interests in the domain name; and (3) that Bosman had registered and used the domain name in bad faith."  M. Scott Donahey and Ryan S. Hilbert, World Wrestling Federation Entertainment, Inc. v. Michael Bosman: A Legal Body Slam for Cybersquatters on the Web, 16 Santa Clara Computer & High Tech. L.J. 419, 421-422.  According to the proponents of the Policy, it is a more efficient and cost-effective method to solve domain name disputes.  Under the Policy, the complainant pays a registration fee, in no event more than $5000, all documentation is submitted electronically or by courier and only under exceptional circumstances will a hearing be granted.  The arbitration panel, consisting of one, two, or three arbitrators, generally makes a decision within a month.  The panel's "decision[] [is] enforced within ten days of their publication on the ICANN web page, unless a party chooses to appeal by filing an action in a court of competent jurisdiction."  Id. at 425-426.  Recent Developments in the ICANN.

The ICANN Policy should be considered only one weapon in an arsenal of weapons against cybersquatting.  And, although, the World Wrestling Federation Entertainment, Inc. "case" proceeded efficiently and cost-effectively, it remains to be seen how more complex disputes will be handled and whether "private justice, sponsored by a private corporation" will result in more protracted and costly litigation in the courts. Id. at 427.

One way in which the ACPA may facilitate "justice" is its provision permitting in rem jurisdiction against the domain name itself, which the ICANN Policy lacks.  "A significant problem faced by trademark owners in the fight against cybersquatting is the fact that many cybersquatters register domain names under aliases or otherwise provide false information in their registration applications in order to avoid identification and service of process by the mark owner."  Melville, supra, at 4-5 (internal quotations omitted).  Proponents of the ACPA claim that "the grant of in rem jurisdiction will alleviate this difficulty." Id. at 5.

In an increasingly Internet-savvy world, "the need for protecting intellectual property rights in domain names will intensify."  Mishkin, supra, at 6.  For the moment, the ACPA offers both "a fine tool for protecting the rights of clients quickly and effectively. . . . [and] also provides helpful guidance [as to] where the safe harbors may be found."  Id.  All we can hope for is that with the advent of the Anticybersquatting Consumer Protection Act and ICANN's Dispute Resolution Policy the Internet will become a more hospitable place for both consumers and trademark owners.