Back in the mid-1990s when the Internet was just starting out, people of all stripes were quick to exploit this new medium. Some domain investors hit the jackpot by registering generic single-word domains, ultimately becoming dot-com millionaires. Others pursued less scrupulous opportunities and bought up trademarked domain names of prominent companies. They then contacted the company that rightfully owned the trademark and demanded a huge “ransom” in exchange for releasing the domain name to the company. This nefarious practice quickly became labeled as “cybersquatting,” the online version of occupation without permission or rightful ownership.
Cybersquatting Is Illegal
In the United States, the Anti-Cybersquatting Consumer Protection Act (ACPA) was enacted in 1999 to protect trademark owners from the dubious actions of cybersquatters. This federal law prohibits the practice of registering domain names (including common misspellings) that either match or closely resemble trademarked names with the intention of selling these domains to the rightful trademark owner for a profit.
Also prohibited under this law is the practice of registering a domain name to cause brand confusion, as well as profiting from ads placed on sites that gain misdirected traffic as a result of cybersquatiing. Domain buyers found guilty under the ACPA can be charged with up to $100,000 in damages per domain name held.
An International Problem
According to the World Intellectual Property Organization (WIPO), an agency of the United Nations, it has received more than 20,000 complaints about illegally registered domain names worldwide since the adoption of the internationally recognized Uniform Domain Name Dispute Resolution Policy (UDRP) in 1999. The WIPO reports that cybersquatting complaints continue to rise, with 28 percent more cases opened by the agency in 2010 compared to the previous year.
In 2007, Dell Inc. launched a major U.S. lawsuit against domain registrars over “typosquatting,” the registration of domain names that are slight misspellings of trademarked names. Verizon has recently filed a $1.83 million dollar suit against Above.com, an Australia-based domain parking company, for cybersquatting.
Celebrities have been targeted by cybersquatters since the invention of the Internet, with such notables as Madonna, Bruce Springsteen and Jennifer Lopez coming under attack. Most companies and high-powered celebrities fight back against the squatters. One such example is NBA star Chris Bosh. His landmark domain name cybersquatting case granted him custody of nearly 800 domain names connected to celebrities and athletes, which Bosh returned to the rightful owners for free both in a display of morality and to promote Bosh’s social media firm, Max Deal.
The Harvard Law School reports that with the exception of one case, “no cybersquatter has won a court case against an intellectual property holder” worldwide. The trend in case law is clearly against cybersquatters, although that has not prevented new instances from arising.
Domain Name Investing Is Not Cybersquatting
Cybersquatters have given domain investing a bad reputation, fueled by the frenzy of media that usually surrounds high-profile cybersquatting cases. As a result, the public often confuses legitimate domain investors with unsavory Internet speculators.
Domain investing in generic or geographically based domain names is a perfectly respectable and legal practice. Many law-abiding citizens have developed viable businesses by buying and selling non-trademark-related domain names. Domain name investing, like other legitimate businesses, requires discipline and expertise. Domain investors must continually review the value of their holdings in comparison to the cost of domain renewal fees. Savvy investors work hard to monitor global trends and consumer patterns to make sound financial choices with their domain name portfolio.
Legal Domain Investing
Honest domain investors looking to avoid any legal trouble should make sure they are well versed in all the relevant laws and regulations. These include the ACPA, WIPO regulations, and policies of the Internet Corporation for Assigned Names and Numbers (ICANN). By respecting intellectual property laws and avoiding any domain names that might be connected to a trademark, domain investors will develop a reputation as credible and ethical businesspeople while avoiding costly litigation.
If you enjoyed this article, subscribe for updates (it's free)